Do you recall April 2002, when mortgage rates were last 7%?
"
Buzz: Mortgage rates just passed 7%, a first since
Source: The average 30-year fixed-rate mortgage comes from a weekly survey of lenders by
Mortgage rates soar past 7%, first time in two decades
Numbers: Rates hit 7.08% this week, up from 6.94% on seven days earlier and 3.14% one year ago. What does it mean for house hunters? Look at it two ways …
* A loss of 36% of the buying power of the same house payment over 12 months.
* Or a 56% jump in the monthly payment for the same amount borrowed from
How long ago?
Let's jog your memory back to
The news: The nation was still reeling from the
The economy: The business climate was on the mend, but US unemployment was 5.9% and 6.7% in
The culture: "Scorpion King" starring Dwayne "The Rock" Johnson topped the box office. "Foolish" by Ashanti was No. 1 on the music charts. "ER" and "CSI" were must-watch TV shows. In sports,
The back story
What's behind the "last time it was this big"? Well, this throwback will sound a lot like the current economy.
By
The reversal began in
Twenty years ago, mortgage rates were slow to fall. But despite 7%-plus rates and broad economic turmoil, housing was relatively unscathed.
The result
It took almost two years from
In
History lesson?
Lesson No. 1: This business cycle took roughly four years from first rate hike to normalcy. And the early 2000s seem simpler times than today's economy.
Real estate enthusiasts will cite the early 2000s as an example of how rising rates and recessions don't always mean falling home prices. Well, that "fact" ignores a key factor — home values were propped up by that era's easy-money "subprime" lending practices.
You do remember how those home-loan gambles ended, yes?
Lesson No. 2: It's a good bet that lenders won't play saviors with stupid loan tricks in 2022's high-rate/high-inflation environment.
Lesson No. 3: Don't forget the price pain when ponder 7% mortgages.
In
Today, it's a
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