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How interest rates are affecting house buyers and sellers

JUANA SUMMERS, HOST:

The Federal Reserve is once again moving aggressively to battle high inflation. Today the central bank hiked interest rates by three-quarters of a percent. It is the fourth time the Fed has jacked up rates this year, a fast and furious pace the country has not seen since the late 1980s.

MARY LOUISE KELLY, HOST:

One place that's already seeing the impact of higher rates is the housing market. The average rate on a 30-year fixed mortgage is now around 5.5%, double what it was just a year ago.

SUMMERS: Those higher rates, combined with already sky-high home prices, mean it's gotten a lot more expensive to buy a house. And it is pushing some would-be homebuyers like Mackenzie Bathgate out of the market.

MACKENZIE BATHGATE: It puts a lot of pressure on you.

SUMMERS: She and her husband, John, have been looking in Lansdale, Pa., for eight months now.

BATHGATE: At this point, we've seen 28 homes in person, but ultimately made seven different offers, each one a little bit more aggressive than the last just because we got so tired of it. It's supposed to be exciting, and it's been the opposite.

KELLY: Bathgate says they have waived inspections, bid tens of thousands of dollars above asking price and still no luck. Meanwhile, they've been watching mortgage rates spiral higher and higher.

BATHGATE: When it was at 3% and then jumped to 3.5% and then jumped to over 4%, that's when we started to feel all that stress up like, oh, God, we need to make sure every weekend is focused on seeing these three specific houses that we're interested in because we know that they're going to have an offer accepted by Monday.

SUMMERS: Now, with rates well over 5%, she says they've given up, for now at least.

BATHGATE: Something's got to give. And when something gives, or we can be more flexible and move, that's when we'll be able to actually take this seriously again.

KELLY: Another homebuyer who feels the clock ticking is Sienna Connor.

SIENNA CONNOR: I refresh Zillow and other websites dozens of times a day because I know that even though it's very stressful, once something comes up, I need to be one of the first people in there to see the house.

KELLY: She's currently renting an apartment in Iowa City with her husband, Rex, and two babies. They started thinking about buying a home in 2020, just before the pandemic, but the bank said they weren't ready.

CONNOR: We were told by mortgage lenders that our credit needed to be a little bit higher. It's taken us a few years to save up for a down payment and closing costs and whatnot.

SUMMERS: Finally, this month, they were pre-approved at an interest rate of 5%. But that rate does not lock until they have an offer accepted on a home. And with all the time that it took to save up and boost their credit, Connor says they may have missed their window.

CONNOR: A few years ago, we probably would be able to afford a decent three-bedroom home for our family. But once the interest rate goes up, we will effectively be priced out of this entire area.

KELLY: Now, we did hear from a few buyers, like Peter Hoyer in New York, who said rising rates have presented an opportunity.

PETER HOYER: I think they actually helped us personally because they diminished the competition a lot. So the last couple of offers that we submitted, including the final one, which was successful, only had a couple offers on the property as opposed to 10 or 20.

SUMMERS: He and his wife, Cathy Yount, are currently in contract on a house in Rochester. Even though rates have gone up, he said they were still able to qualify for a mortgage. And they're happy they got in when they did.

HOYER: Knowing that we have a stable - we're going to have a stable living situation and being able to paint the walls whatever color you want and, you know, have those sort of benefits without having to worry about the rent changing kind of makes it a no-brainer decision for us.

KELLY: So some homebuyers are coming out ahead despite higher rates. But for those still looking, people like Sienna Connor and Mackenzie Bathgate, things are pretty bleak.

CONNOR: When you've worked really hard to get in a position to buy a house, and then this interest rate issue comes up and we have absolutely no control over it whatsoever, we kind of just have to sit here and wait it out. It's something that I've been trying to process and grieve as well, but it's just overall very sad.

BATHGATE: We just want a home. 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 disheartening, and I feel like the American dream isn't attainable anymore.

SUMMERS: That was Mackenzie Bathgate in Lansdale, Pa., Sienna Connor from Iowa City, Iowa, and Peter Hoyer in Rochester, N.Y.

(SOUNDBITE OF BADBADNOTGOOD'S "TIMID, INTIMIDATING") Transcript provided by NPR, Copyright NPR.