Housing in the US: Mortgage rates hit 7% and renters feel squeezed

0:00It's Consider This, where every day we go deep on one big news story. Today, housing affordability. If you are looking to buy a house or rent a place to live, you are probably feeling squeezed right now. Rents are rising. We see wages are stagnating or maybe not increasing as much as the cost of living is. That's Julia Ordunia from Texas Housers. They advocate for affordable housing. People are trying to decide where the dollar, where the dime goes, and what are costs they can actually minimize to be able to make the costs that are fixed like rent. And it's not just renters. People looking to buy homes are facing a pricey new reality.

0:397 % interest rates on a 30-year mortgage, the highest in more than a year. Consider this. For a lot of people, housing is very expensive. We take a closer look at what's going on and why it matters.

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2:01It's Consider This from NPR. If you have been waiting for homes to get more affordable before buying, you are going to have to keep waiting. Mortgage rates for a standard loan are now more than 7 % for the first time in well over a year. Here to tell us what that means for homebuyers is NPR's Stephen Basaha. Hey, Stephen. Hey, Scott. Hope you're not planning on moving anytime soon. Not anymore, for sure. I mean, what is going on here? Yeah, well, you know, these rates, they are rising fast. The most common type of mortgage is the 30-year fixed rate mortgage. Two weeks ago, the national average was about 6.75 % for the interest rate.

2:40Today, it's up more than a quarter of a percent. So by mortgage rate standards, that is a sharp jump. So what do we think happened to cause such a big jump? Okay, stop me if you've heard this one before. It goes back to the U.S. war against Iran. The war has played a big part in driving up mortgage rates by driving up the cost of oil and with it inflation. Inflation concerns go up, bond yields go up, and mortgage rates tend to follow. And remember, the bond market influences borrowing costs all across the economy, including for homes. There's also a bunch of other factors hitting the bond market like all at once right now.

3:13Okay, run through a few of those for me. Well, you got like tech companies issuing their own bonds to pay for data centers and AI. Investors are buying up those instead of government bonds. You also had the Federal Reserve raise their benchmark interest rate last week, about a quarter of a percentage point. That's a pretty modest move, but some of the Fed's policymakers are signaling more hikes could be on the way. Investors do not love that. And underneath all this is still stubbornly high inflation. I did speak with Joel Kahn. He's an economist with the Mortgage Bankers Association. He says all these factors contribute to higher rates and really squeeze homebuyers.

3:49If they want to buy, that adds a lot to their monthly payment. Also prevents some borrowers from qualifying for their mortgage because of this higher expected payment. And it also slows down home sales. Stephen, I'm going to ask you to make a lot of people very sad by walking through in detail what exactly a 7 % mortgage rate would mean for people's budgets. Yeah, sorry to do it. But, you know, if you have the average home in the U.S., like median sale price, it's around$430 ,000. If you got a standard loan right before the war when rates were right around 6%, you'd be paying a little more than$2 ,000 a month on just the principal and interest.

4:26But if you got a loan at today's rate, that'd be more than$200 extra each month. And$200 more each month, that could put a big squeeze on a lot of people's budgets. And there's a really important caveat here. what you pay depends on your credit score. If your credit score is less than excellent, you'll be paying a lot more each month for a home. What does this mean for people who already own a home? Well, most of them have a fixed rate mortgage, so rates going up doesn't really affect their monthly housing budget. But if they want to move into a new house, they could end up paying a lot more. Like take someone with a 3 % rate during COVID.

4:59If they sold their home today and moved into a similar size place, some similar size loan, they'd be paying$800 more each month. This is the reason why so few people are selling their homes and they just can't make the math work. That is NPR's personal finance reporter, Stephen Bisaha. Thank you so much. Thank you, Scott. Renters are also feeling the squeeze and not just people with low incomes. New research from the Urban Institute shows that more renters are struggling to pay for housing every month. NPR's Marissa J. Lang spoke about it with my co-host, Juana Summers. OK, so I'm a renter. I've got a bunch of questions here, but start by telling us, what are we learning that's new in this research?

5:36Totally. Fellow renter here. And the number of renters who are struggling to pay for their housing has increased a lot, according to this new study, which took more than 10 ,000 adults and asked them if at any point in 2025 they had to miss a rent payment, either completely or if they had to file it late because they couldn't afford to pay the full amount. And what the researchers found was, yeah, around 20 percent of renters had this happen. That is a big jump from the year before and actually the largest percentage researchers have seen since they started doing this affordability survey in 2019.

6:08The most surprising piece, they told me, was that this jump isn't being driven by low-income renters who typically have the hardest time making payments, as you would imagine. Instead, what they saw was middle-income renters experiencing a huge shift in their ability to afford basic needs like housing. Here's researcher Samantha Batko. The expansion to middle-income households with significantly more households reporting challenges paying rent, that definitely raises concerns for me that there are potential implications for inflow into homelessness. These middle-income families are a group that have not historically been struggling at this rate.

6:48So is rent just increasing that much? Rents have been going up nationally, yes, but it's not just the rent. Wages haven't kept up with inflation, which we know has been climbing, and the costs of other goods and services has been going up and up and up. So with prices rising and families' earnings holding more or less steady, it's forcing people to make tough choices about where to spend the money they have. Julia Orduna from Texas Housers, an organization that helps low-income families, put it to me this way. I think people are really struggling to decide what is most important to pay. Are we paying for medications?

7:25Are we paying for food on the table? Or are we paying our rent? She told me that rent hikes have been happening in places other than the sticker price of an apartment. In communities she works with in Texas, renters are seeing all kinds of additional fees tacked onto their rent. So things like pet fees or trash collection fees or pest control fees or parking. there's this cost creep driving everything up. And if people start to fall short, they get hit with late fees on top of that. OK, so if more people are now falling behind on their rent, as well as these other housing costs, does that mean we're seeing higher rates of eviction?

7:59That's what experts are worried about. But it's not showing up in the numbers yet, at least not nationally. Evictions jumped way up across the U.S. post-pandemic. But since 2023 or so, eviction rates have held pretty steady. But that doesn't mean evictions aren't happening. And what experts worry about is that the kind of people facing eviction could be changing. Here's Ordunia again. We are seeing that people are being evicted in higher income areas as well, which is something that we're asking ourselves. If it's not in lower income areas or in areas where people are on fixed incomes, we do assume that some of these folks are middle income earners.

8:37Do they have a sense of why evictions would be hitting middle income tenants? experts and outreach workers I spoke to say that what's going on is rents and other costs keep rising, but wages, even middle income wages, are not keeping pace. That means more people experiencing housing insecurity or even homelessness for what's probably the first time. That's NPR's Marissa J. Lang. Thanks. Thanks, Juana. This episode was produced by Megan Lim, Kai McNamee, and Jason Fuller with audio engineering by Ted Meebane. Our director is Jonas Adams. It was edited by Timbeat Ermias, Raphael Nam, Justine Kennan, Merit Kennedy, and Jeanette Woods.

9:14Our interim executive producer is Courtney Dorning.

9:20It's Consider This from NPR. I'm Scott Detrow. If the creation of the universe was translated into music, what would it sound like?

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