Interest Rates are KILLING the Housing Market | Morris Invest

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Today we’re going to talk about the critical connection between interest rates and the housing crisis we’re seeing across the United States.

For years, we’ve been in an affordable housing crisis. Since the great recession, there has been a massive shortage of homes. Builders, of course, have been hesitant to build in droves since getting burned in 2008 and 2009.

And we know that in the past few years, the prices of everything have risen dramatically, right? This includes lumber, land, and labor. It has become very expensive to build a home.

Then, there are interest rates. Higher interest rates over the past couple years have put a massive halt on home sales across the country.

The rates are not incredibly high on a historical scale – but they are in comparison to 2019 and 2020. And when you combine a higher interest rate with a higher price, of course this impacts purchasing power.

Interest rates are important piece of adding supply to the housing market. More and more people are choosing to just stay in their existing home. This includes families in starter homes, older folks with empty nests, and everyone in between. It’s been estimated that more than 90% of American homeowners are locked into rates below 6%.

So unless rates drop significantly, there are a lot of people that are just going to sit tight, and forgo selling until they can find a better deal. This is of course creating a giant bottle neck in the supply – one that didn’t really exist until the last couple years.
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