Interest rates have been climbing consistently for the last few months and last week the Federal Reserve raised interest rates by 75 basis points (0.75%). That federal rate contributes to other interest rates, including the average for a 30-year fixed-rate mortgage, which is now 5.78%. Both the increase and the mortgage rate are the highest they’ve been in years.
The 30-year mortgage rate was 3.3% in the early 2020s, 4.1% in the early 2010s and north of 6% in the early 2000s. In the 1970s to 1990s, they ranged from 8% to The mortgage interest rate remained north of 8% throughout the 1990s, north of 12.5% throughout the 1980s and close to 9% in the 1970s.
“They are still historically low, but from a recency standpoint, they definitely are high,” he said.
3) There’s a shortfall of homes
Economists say the nation is anywhere from 1 million to 5 million homes short of what it needs to keep up with demand, Farrell said.
“The Miami Valley Regional Planning Commission did a comprehensive housing study,” he said. “The city of Dayton has done comprehensive housing studies and I would ... argue that we’re probably 20,000 homes short of where we need to be.”
The biggest challenge on the local level is ensuring that there are enough homes being built to accommodate an influx of jobs and, with it, people moving to a given city or the region as a whole to fill them, he said.
4) It’s costing home builders more to build a home
National Home Builders Association data shows the cost of most materials used to build a home are spiking, Farrell said. “We’re looking at about a 20% increase at the cost of a new construction home right now with all the other materials,” he said.
That means a more expensive home for those wanting to buy a new home.
5) Fewer homes are being built in the Dayton area
Supply chain issues have led to home builders to be cautious in the ramp up in production because they do not know when they are going to get materials and do not know how much those materials are going to cost when they get them.
A total of 236 single-family permits were issued in April 2022, compared to 365 in 2021, representing a 35.3% decrease, according to HBA of Dayton permit data,
6) Only one of the five “L’s” can be controlled
When it comes to housing, there are five Ls: labor, lumber (which is considered materials), land, lending and laws, Farrell said. Only the last one can be controlled and “is something we can have real conversations about at the local level,” Farrell said.
Things local government can examine and possible adjust include permitting laws, zoning regulations, land use policies and building specs, he said.