By Tim Cook
The S&P CoreLogic Case-Shiller U.S. National Home Price Index [TC1] reported an 18.8% increase in home prices in the U.S. in 2021, marking a substantially higher rise than in 2020 when home prices rose by 10.4% overall.
This price increase is occurring across the country, with potential homebuyers in the southwest and southeast seeing the highest increases. The rising prices have made it more difficult for people on average to purchase a home, even those who were reasonably able to do so before the COVID-19 pandemic.
A CNN Business report on Feb. 22, 2022, cited S&P Dow Jones Indices managing director Craig J. Lazzara, who said that though home prices have risen at record rates, that rise has slowed since August 2021. However, mortgage rates across the country have been rising, climbing to 3.92% for 30-year fixed-rate mortgages, according to the government-sponsored mortgage company Freddie Mac.
Mortgage rates are the highest they have been since May 2019. This has made borrowing money for a mortgage or refinancing more expensive for buyers, with the Mortgage Bankers Association saying that refinance applications have fallen in number by 45% since September 2021.
With fewer mortgages being pursued and fewer homes being bought, pain is felt not just by homeowners and potential buyers but also in the mortgage industry. Per the U.S. Bureau of Labor Statistics, the number of mortgage brokers in the country has grown over 50% since the latter half of 2019.
With falling rates of mortgage applications and home purchases, the industry has started to see the expected wave of layoffs among its ranks.
To secure reliable work in the business, some lenders have turned to accepting borrowers with lower credit ratings on average, falling from 750 on the FICO scale in January 2021 to 733 in January 2022. Despite these measures, Bloomberg Intelligence analyst Erica Adelberg suggested that a return to sub-prime mortgages is not in store, citing post-crisis regulations in the wake of the 2008 recession would prevent such a thing from happening.
According to the National Association of Realtors, home inventory dropped to record low levels in December 2021. Prices and mortgage rates continue to rise as demand increases.