Low Mortgage Rates Can’t Slow the Housing Bubble

People who presently own a home in the US may have a lot to look forward to as interest rates in America are among the most affordable they’ve been in a long time.

The most recent data from Black Knight suggests that approximately 9 out of 10 American mortgages currently have an interest rate below 5%.  Roughly 20 years ago, the average mortgage rate floated around 6 percent; this is quite the incentive for current homeowners to hold onto their assets.

On the other hand, these numbers could mean something a lot less favorable for people who are looking to buy a home.  As many have probably already noticed, homeownership in the US is getting more and more expensive.  Sure, rates are low for now but they are on the way back up; and home prices are on the rise as well.  And these two variables may be discouraging people from considering the sale of their home, which means less inventory available for those looking to buy.

According to researchers at Black Knight, “This combination of accelerating growth and sharply rising interest rates has resulted in the tightest affordability in 15 years.”

This growth is largely fueled by two years of low mortgage rates that enticed several million Americans to buy a home.  This has led to the rates rising at the same time that affordability is plummeting to its lowest rate in several decades.  All in all, the stifled inventory coupled with higher interest rates could put the US housing market in place for yet another bubble.

In a similar measure, Fannie Mae has recently commented that 92 percent of homeowners admit their current home is affordable.  Outside of this particular group, however, the general population—including those who own and those who rent—believe things are far more bleak.  As a matter of fact, Fannie Mae’s research suggests that upwards of 70 percent of Americans believe it is currently too hard to find housing that is affordable.