Mortgage rates in the United States soared to their highest level in 21 years this week, as potential home buyers face low inventory, a situation deficit-inducing Republicans blame on the White House but economists say is not solely the result of “Bidenomics.”
The Federal Reserve is raising rates in an effort to combat inflation, which is at a 40-year high due to corporate greed and supply chain issues including some influenced by the war in Europe and others that remain from the recent pandemic.
However, President Joe Biden’s economic policies have also played a role because they do not go far enough to hinder the transfer of wealth from the working class to the super-wealthy or recycle money throughout the entire economy. Biden has also missed the mark with failures to enact a windfall profits tax, raise the federal minimum wage, or address the world’s reliance on climate-crushing fossil fuels.
The 30-year fixed-rate mortgage averaged 7.09%, according to data from Freddie Mac. This is a significant increase from 5.13% a year ago. The last time mortgage rates were this high was in April 2002.
The rise in mortgage rates is being driven by the Federal Reserve’s historic interest rate-hiking campaign. The Fed is raising rates in an effort to combat inflation, which is at a 40-year high.
Higher mortgage rates make it more expensive to buy a home, and this is putting a damper on the housing market. Home sales are down about 20% from a year ago.
The low inventory of homes for sale is also contributing to the problem. There are currently about 1.2 million homes for sale nationwide, which is the lowest level since 2019.
This combination of factors is making it difficult for many people to buy a home. Homebuyers are having to compete with each other for a limited number of properties, and they are having to pay higher prices.
It is unclear how long mortgage rates will stay high. The Fed has signaled that it will continue to raise rates in the coming months, but it is possible that the pace of rate hikes will slow down.
If mortgage rates do start to come down, it could help to revive the housing market. However, it is also possible that the low inventory of homes for sale will continue to be a problem.
New Jersey Residents Impacted
The rising mortgage rates are having a significant impact on potential home buyers in New Jersey. The median home price in the state is currently $550,000, which means that a 7.09% mortgage rate would result in a monthly payment of about $3,150.This is a significant increase from the monthly payment of about $2,500 that a borrower would have paid with a 5.13% mortgage rate.
The high mortgage rates are making it more difficult for many people to afford to buy a home in New Jersey. This is especially true for first-time homebuyers and people with low incomes.
The low inventory of homes for sale is also making it difficult for people to find a home that meets their needs. Many people are finding that they have to compromise on the size or location of their homes in order to find something that they can afford.
The rising mortgage rates and low inventory are making it a challenging time to buy a home in New Jersey. However, there are still some things that homebuyers can do to improve their chances of success.
One thing that homebuyers can do is to get pre-approved for a mortgage before they start looking at homes. This will give them an idea of how much they can afford to borrow and will make the home-buying process go more smoothly.
Homebuyers should also be prepared to act quickly when they find a home that they like. The market is competitive, and homes are often selling quickly.
Finally, homebuyers should be patient. The housing market is cyclical, and it is possible that the conditions will improve in the future.
Some of the key components of Bidenomics include:
- Increasing government spending on infrastructure and education
- Investing in clean energy
- Raising the minimum wage
- Expanding access to healthcare
Still influencing matters are a set of 40-year-old policies based on the discredited ‘supply side’ trickle-down theories, often known as Reaganomics.
Biden and his supporters argue that these policies are necessary to create a more equitable and prosperous economy but critics say they do not go far enough to repair structural problems that resulted from the economic policies of Ronald Reagan, who was president from 1981 to 1989.
Reaganomics is a set of economic policies that are based on supply-side economics. Supply-side economics argues that the best way to stimulate economic growth is to cut taxes and reduce government regulation.
Reagan enacted a number of policies that were based on supply-side economics, including:
- Cutting taxes for businesses and wealthy individuals
- Deregulating the financial industry, which yielded disastrous results
- Increasing military spending, which helped diminish America’s democracy
These policies were wildly unsuccessful in stimulating economic growth but they led to increased income inequality and budget deficits that have increased the national debt .
The national debt, in 1980 dollars, has increased by about 500% since Reagan was elected, after adjusting for inflation. As a share of GDP—the country’s economic output—the national debt was 26.2 percent in 1980, however, the debt-to-GDP ratio has increased steadily since then, and it now stands at 122.8 percent.
The truth is that the rising mortgage rates are due to factors other than government spending, such as the Federal Reserve’s interest rate-hiking campaign, the ongoing war in Ukraine, and supply that has failed to keep pace with demand in the post-pandemic era.
It is worth noting that mortgage rates were rising before Biden took office and even the massive spending Republicans complain about was initiated during former President Donald Trump’s presidency, when the GOP raised the debt ceiling three times while adding $8 trillion in deficits.