Over the past 18 months, U.S. mortgage rates have soared from 2.9% to 7.6%, their highest since 2001. Will this tremendous increase in mortgage rates cause the U.S. housing market to crash like it did in 2008?
On one hand, higher mortgages have led to a steady decrease in the number of new mortgages being issued. In recent weeks, the number of new mortgages has fallen to its lowest level since 1995.
On the other hand, there is a major difference between today and the period leading up to the global financial crisis: vacancy rates.
Vacancy rates are extremely low. Before the 2008 financial crisis, 10% of rental properties and 3% of owner-occupied properties were vacant. Today, only 6.4% of rental properties are vacant, near their lowest since 1985, while owner-occupied properties have a record low vacancy of 0.7%.
Home prices have stopped rising, but so far, they aren’t collapsing. Over the past year, the price of buying a home in the U.S. has fallen by about 1%, while rental costs have risen by around 8% as higher rates force many would-be buyers into the rental market.
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