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The current state of the housing market worries many people, including brothers and housing experts Drew and Jonathan Scott, known for their HGTV show “The Property Brothers.”
Rising home prices and rising interest rates have made many first-time homeowners feel like buying a home isn’t yet possible. And according to the brothers, the lack of housing supply is the main factor that prevents people from buying.
“Right now, the biggest problem is that inventory is really bad,” Jonathan Scott told Brian Sozzi on Yahoo Finance’s Opening Bid podcast (watch the video above or listen to it below). He noted that the U.S. housing inventory is approximately 4.5 million homes below “healthy market” levels.
“When you don’t have a healthy housing inventory, that’s probably the biggest factor [of unaffordability] because competition is what makes prices rise and fall,” he added.
Although the Federal Reserve began cutting short-term interest rates, totaling three-quarters of a percentage point since September, mortgage rates have continued to rise.
When the Federal Reserve announced its first cut of this cycle in September, 15-year mortgage rates were at a 52-week low of 5.15%; Now the same fixed-rate mortgage sits at 6.02%, according to Freddie Mac. 30-year mortgage rates have risen similarly in that period and are three-quarters of a percentage point higher than they were two months ago.
Read more: How the Federal Reserve’s rate decision affects mortgage rates
It’s not just the current real estate market that worries the brothers.
“My fear is that in 20 years our children won’t be able to afford to buy a house,” Jonathan Scott said. “No one will be able to enter the market because it will be very expensive. We need to start addressing that problem now.”
Although the brothers admitted that it is “healthier” for the market when interest rates fall, Jonathan predicted that lenders could introduce new products to “incentivize” young homeowners, noting that these products may come with conditions that could force them to homeowners to pay their mortgages for a time. longer period of time.
“Lean on the fact that lenders want you to get their products, they want to lend you the money, they’re going to come out with products that will make it a little more affordable,” Jonathan said. “The problem, however, is that they are going to extend the payback period, so it will take longer to pay off that investment.”
