As the U.S. housing market suffers from its lowest sales volume since the mid-1990s, economist Peter Schiff says the economic downturn is causing homeowners to sell their properties to keep up with existing mortgages. It warns of an impending crisis that relies on renting.
As the National Association of Realtors (NAR) reported last week that existing home sales are sluggish and median sales prices are soaring, Schiff spoke on the “Peter Schiff Show” podcast about how homeowners are seeing potential in the real estate market. It was pointed out that this could lead to a trend. Selling on the open market means taking out a new mortgage at a higher rate, whereas you start renting out your home to keep the property at a lower mortgage rate.
“Existing homes aren’t selling,” Schiff said. “People on mortgages have low mortgages and are not willing to sell, and those who want to buy mortgages can’t afford to buy because they don’t have access to the lowest mortgage rates.
“People who own their homes don’t want to sell because of where they plan on living. So they have low mortgages that they don’t want to let go of. Now they’ll probably rent.” , to help them keep their mortgages. ”
Housing construction continues in the housing complex. Economist Peter Schiff says homeowners who feel “locked in” to existing mortgages are turning to renting out their properties rather than selling them for fear of taking on a mortgage. I warned you that In housing development, construction of houses continues. Economist Peter Schiff has found that homeowners who feel “locked in” to their existing mortgages are less likely to sell their properties for fear of taking out a new mortgage at a higher interest rate. He warned that there is a tendency for people to rent their homes. Other David McNew/Getty Images
NAR reported last week that existing home sales fell at a seasonally adjusted annual rate of 3.78 million units, down 1% month-over-month and 6.2% year-over-year. At the same time, the median sale price of existing homes in December increased to $382,600, an increase of 4.4% year-on-year, continuing the upward price trend.
“If anything, this just shows how bad the economy is, and it’s only going to get worse,” Schiff said.
Newsweek reached out to Schiff for comment through his website.
The situation, which has forced homeowners into what experts call a “lock-in” effect, has been exacerbated by a campaign to raise interest rates launched last year by the Federal Reserve aimed at curbing inflation. Although the Fed has signaled its role in raising interest rates is over, the impact will be long-lasting, especially on mortgage rates.
Orphe Divounguy, a senior economist at Zillow, expanded on Schiff’s view, telling Newsweek, “As long as mortgage rates continue to rise, homeowners with lower mortgage rates will continue to forgo lower monthly payments. “They will be reluctant to exchange for a higher mortgage amount.” Raise mortgage interest rates if it’s not necessary.
“Homeowners who took advantage of ultra-low interest rates to purchase or refinance their mortgages are now in a position of great financial equity,” Divongai said, adding that the technology-first real estate market is likely to see this situation continue into 2022. He added that he had predicted it would happen heading into 2020. And “for many homeowners, that’s still the case.”
Darryl Fairweather, Redfin’s chief economist, echoed Zillow’s sentiment, saying, “Homeowners are stuck with low mortgage rates in the summer of 2022, when rates first started rising dramatically.” He told Newsweek magazine that he had observed it. “Mortgage rate locks continue to be a major factor preventing homeowners from selling,” Fairweather said.
But Fairweather said Redfin is seeing a “gradual recovery” as homeowners who had delayed selling due to high interest rates are starting to enter the market, driven by life events that outweigh financial considerations. He said that he is starting to do so.
Still, Schiff said on the podcast that while mortgage rates are down from October’s highs of more than 8%, they are “still not low enough for[buyers]to be able to afford the prices that existing homeowners want.” .
