They Signed Contracts for Their Dream Homes Last Year. Now Their Borrowing Costs Are Ballooning.

Abstract

New-home buyers are confronting multiple obstacles this year, from surging mortgage rates to home construction that is taking longer than usual due to supply-chain and labor constraints. Many home buyers who signed contracts for new homes in 2021 or early this year calculated monthly payments based on near-record-low mortgage rates of around 3% or less. Borrowers have been largely willing to absorb the added costs. The combination of fast-rising prices for new construction and higher mortgage rates is likely to thin the buying pool. Buyers of new homes and higher rates is also likely to be more likely. Buyer of existing homes face much less interest-rate risk. The difference can translate into hundreds of thousands of dollars more a month in mortgage payments.