Fed interest rate hikes hit would-be homebuyers hard

ABC News’ Elizabeth Schulze reports on the impact of rising mortgage rates on homebuyers as the Federal Reserve tries to tame inflation by once again raising interest rates.
4:19 | 09/22/22

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Transcript for Fed interest rate hikes hit would-be homebuyers hard
 OUR THANKS TO YOU AS ALWAYS. ONE GROUP HIT HARD, THOSE LOOKING TO BUY A HOME AFTER A BOOM IN PRICES, A RED HOT HOUSING MARKET DURING THE PANDEMIC, -- EVEN HIGHER FOR THOSE STILL ON A HUNT. ELIZABETH JOSIE HAS THE STORY. >> WHEN EMILY BROWN'S DAUGHTER WAS BORN, THE FAMILY SOON REALIZED THEIR TWO BEDROOM APARTMENT WAS TOO SMALL. >> NO PLACE FOR HER TO PLAY AND CRAWL AND WALK AROUND. >> EMILY, A MATH TEACHER IN WASHINGTON, D.C. AND HER HUSBAND, AN ARMY VET, HAD SAVED UP TO BUY THEIR FIRST HOME. >> WE REALIZED QUICKLY THAT THE RATES HAD GONE UP, WHICH WOULD INCREASE OUR MONTHLY PAYMENT. >> SOARING MORTGAGE RATES FORCED THE BROWNS TO CUT THEIR BUDGET FROM 500,000 TO $400,000. AND TO MAKE OTHER SACRIFICES. >> WE HAVE TO GIVE UP SOME OF THE THINGS WE WANTED, LIKE A GARAGE, LESS SQUARE FEET, EVEN FARTHER OUT FROM D.C. THAN WE HAD ORIGINALLY PLANNED. >> REALTORS SAY, -- SQUEEZING THEIR BUDGETS, MAKING TRADE-OFFS AS MORTGAGE RATES SPIKE. >> PEOPLE ARE CHANGING THEIR BUDGET AND THEIR LOCATION, ALSO MAYBE CHANGING THE SIZE OF THE HOME. >> FOR THE FIRST TIME SINCE 2008, THE AVERAGE RATE ON A 30 YEAR FIXED MORTGAGE IS NOW ABOVE 6%, DOUBLE THE RATE OF THE START OF THE YEAR. ACCORDING TO BANK RATE, THAT IS AN ADDITIONAL $500 A MONTH, FOR A BOROUGH OR TAKING OUT A 300,000 DOLLAR LOAN. THE COSTS ARE THE RESULTS OF AN AGGRESSIVE CAMPAIGN BY THE FEDERAL RESERVE TO FIGHT SKY HIGH INFLATION. >> THEIR MAIN TOOL FOR DOING THAT IS RAISING INTEREST RATES WHICH MAKES IT MORE EXPENSIVE FOR PEOPLE TO BORROW MONEY, THE HOUSING MARKET IS JUST COLLATERAL DAMAGE TO GET THE ECONOMY BACK ON TRACK. >> THEY DID KIND OF PUT US IN A PICKLE. >> FIFTH GRADE TEACHER WESLEY ROBINSON AND HIS FAMILY STARTED BUYING A NEW HOME IN ARKANSAS LAST YEAR. WHEN INTEREST RATES WERE CLOSE TO -- >> WE THOUGHT, IF WE WILL UPGRADE, NOW IS THE TIME. >> BUT AS THE PANDEMIC STALLED CONSTRUCTION AND THE PANDEMIC KEPT RAISING RATES, THEIR NEW HOME ONLY GOT MORE EXPENSIVE. ENDING UP AT 5% INSTEAD OF THREE. >> IT WAS FRUSTRATING, AND IT DID ADD, THREE, $400, TO THE POTENTIALLY MONTHLY COST TO OUR MORTGAGE. >> WESLEY FEARS HIGHER RATES MIGHT SCARE OFF BUYERS FOR THEIR OLD HOME. >> WE DON'T WANT OUR HOME TO SIT THERE FOR WEEKS AND WEEKS, WE KIND OF NEED THE MONEY. >> REITER'S SAY MANY ARE NOW WAITING TO SELL WITH A LIMITED SUPPLY OF HOMES, KEEPING PRICES HIGH. MANY ASPIRING BUYERS ARE PUTTING THEIR HOMEOWNERSHIP DREAMS ON HOLD. >> HAD YOU AT ALL CONSIDERED, JUST SAYING, FORGET IT, I WILL KEEP RUNNING UNTIL THESE RATES GO DOWN? >> THERE IS NOTHING THAT IS AFFORDABLE, THEN WE WILL JUST WAIT. >> AFTER RENTING IN MARYLAND FOR SEVEN YEARS, SIMONE JACOBS IS TRYING TO BUY A PROPERTY FOR THE FIRST TIME. >> THIS WEEKEND, WE LOOKED AT ABOUT 6000. >> EXPANDING TO NEW NEIGHBORHOODS AND OLDER HOMES. >> SOME OF THE PLACES WE LOOKED AT, TIME CAPSULES FROM THE 19 50S OR 60S. >> BUT THERE IS A FLIPSIDE OF HIGHER COSTS KEEPING BUYERS ON THE SIDELINES, IF YOU ARE BIDDING WARS IN A HOUSING MARKET THAT WILL BE RED HOT FOR MORE THAN TWO YEARS. >> THE MARKET IS COOLING OFF IN SOME WEST COAST CITIES INCLUDING SEATTLE, LAS VEGAS, SAN JOSE, CALIFORNIA. >> YOU CAN GET YOUR OFFER ACCEPTED MUCH MORE EASILY BECAUSE YOU ARE NOT FACING AS MUCH COMPETITION BUT THE BAD NEWS IS THAT THE MORTGAGE IS GOING TO BE MUCH MORE EXPENSIVE. >> ONE BIG PROBLEM FOR HOME BUYERS STUCK ON THE SIDELINES, RENTS ARE INCREASING, 6.7% IN AUGUST FROM A YEAR BEFORE. THE BIGGEST SPIKE IN NEARLY 40 YEARS. >> IF YOU WAIT A COUPLE MORE YEARS, YOUR RENT KEEPS GOING UP AND THEN YOU HAVE TO DEAL WITH THE ADDED EXPENSE OF HIGHER PRICES AND MORE COMPETITION IN THE HOUSING MARKET. >> EMILY BROWN AND HER FAMILY TOOK THE LEAP INTO HOMEOWNERSHIP. SET TO CLOSE NEXT MONTH ON THEIR FIRST HOME. >> WE REALLY JUST THOUGHT ABOU, IF WE CONTINUE TO RENT, THAT MONEY COULD GO TOWARDS THE MORTGAGE, SO YOU REALLY PUT THOSE

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