As interest rates rise, the “American dream” of home ownership is fading for some

Mackenzie Bathgate and her husband John have been trying to buy a house in Lansdale, Pennsylvania for eight months.

“We’ve seen 28 houses in person so far, but we ended up making seven different offers, each one a little more aggressive than the last, just because we got so tired of it,” Bathgate said. “It’s supposed to be exciting, but it’s the opposite.”

Bathgate said they waived inspections and bid tens of thousands of dollars above the asking price, but still had no luck.

For now, the Bathgates have put their search on hold as interest rates have risen again. (Mackenzie Bathgate)

Meanwhile, they’ve watched interest rates climb higher and higher – each increase increasing the pressure to find their home.

“That’s when we started feeling stressed, like, ‘Gosh, we need to make sure every weekend is focused on looking at these three specific houses that we’re interested in,’ because we know they’re going to have an offer accepted by Monday.”

Now the couple is exhausted and has decided to put the search on hold, just as the Federal Reserve raised interest rates again.

On Wednesday, the central bank raised rates by three quarters of a percent. This year, it is being done for the fourth time — the US has not seen such a pace since the late 1980s.

The average rate on a 30-year fixed mortgage is now around 5.5%, almost double what it was at the beginning of the year. according to Freddie Mac. These higher rates, combined with already high home prices, mean it’s become a lot harder to buy a home, even though there may be a little less competition.

“Nationally and locally, we’re seeing cooling, lower demand and increased supply,” said Ashley Jackson, a Realtor with Realty Austin in Austin, Texas. “We’re seeing it across the board, which is to be expected with such a sharp increase in interest rates.”

Jackson said the red-hot real estate market has allowed sellers and agents to become accustomed to properties being snapped up within days and inundated with 20 or more offers for listing, many of which exceed the asking price.

“[Sellers] may feel a little disappointed if their home has been on the market for 21 days, which is actually still pretty good. So it’s just a narrative,” said Jackson, who is also the 2022 president-elect of the Austin Board of Realtors.

But there was no end to the frustration for homebuyers, who were struggling with a competitive market and steadily rising interest rates.

Sienna Connor currently rents an apartment in Iowa City with her husband Rex and two children. The Connors began considering buying a home in 2020, just before the pandemic, but the bank said they weren’t ready.

“The mortgage lender told us our loan should be a little higher. It took us a few years to save up for the down payment and closing costs and more,” Sienna Connor said.

Finally, this month they were pre-approved for an interest rate of 5%. But that rate won’t lock in until they get an offer on the home. And with all the time it took to save and build their credit, Connor said they may have missed their mark.

“A few years ago, we could probably afford a decent three-bedroom house for our family. But once the interest rate goes up, we’ll be effectively shut out of that whole area,” she said.

Others were able to find opportunities within the expansion, like Peter Hoyer and his wife, Kathy Yount. After much searching, they finally closed a contract on a home in Rochester, New York.

“I think they are [higher interest rates] actually helped us personally because they reduced the competition significantly,” said Peter Heuer. “So the last couple of offers we’ve made, including the last one that was successful, we’ve only had a few offers on the property as opposed to 10 or 20.”

Peter Hoyer and Kathy Yount fought over a house in Rochester, New York. (Courtesy of Peter Heuer)

Hoyer said he is happy with the stability and freedom that home ownership will give him and his family. But for the Bathgates of Pennsylvania, the Connors of Iowa, and countless other Americans, these luxuries feel more out of reach than ever.

For Bathgate, it’s simple.

“We just want a house,” she said. “We just want to have a family and a yard and be able to have a beer on our deck at the end of the day. And it’s sad, and I feel like the American dream is no longer attainable.”

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