TAMPA, Fla. – For the first time since February 2011, the mortgage rate in the United States for a 30-year-fixed rate home loan hit 5%. In November 2018, the rate approached 5%, but never quite made it before dropping down to historic lows in December 2020, as the COVID-19 pandemic raged.

Amid ongoing inflation month after month, the Federal Reserve has planned a total of seven rate increases across the market, the first of which hit in March. The second has not yet come, and the mortgage rate has still risen to 5%. Still, due to lack of available inventory, home prices continue to climb.

The market’s fluctuation and continuous price increases have a large impact on buyers, according to Freddie Mac, one of two federally backed mortgage companies.

“As Americans contend with historically high inflation, the combination of rising mortgage rates, elevated home prices and tight inventory are making the pursuit of homeownership the most expensive in a generation,” Sam Khater, Freddie Mac’s chief economist said.

The question becomes: Is a home worth what you’ll pay for it?

Right now, the prices for homes in the U.S. have risen steadily as a result of limited inventory and slower building processes. Inflation has made rent and materials more expensive, trapping potential homebuyers, especially first-timers, in a spot between paying a lot more in rent, or buying a home for more than it may be worth.

The lack of more homes available, while millions sit empty across the U.S. for a variety of reasons, has contributed to the price increases, even when the actual value of the property doesn’t change. Mortgage rates rising means not only that your home is going to be more expensive when you buy it, especially while the market remains hot, but that your monthly payments will be higher due to the interest rates increasing.

Some areas are seeing prices climb faster than others, with places like Florida rapidly growing more expensive alongside rapid levels of migration. The population of the Sunshine State is booming due to people moving in from out of state at the same time its birth rate is on the rise, unlike other states.

Homes are selling fast, but prices are rising faster. As a result, taxes on home purchases are also climbing.

According to ATTOM, a real estate analysis company, property taxes went up in 2021. However, the company said the weird part was the amount.

“It’s hardly a surprise that property taxes increased in 2021, a year when home prices across the country rose by 16%,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “In fact, the real surprise is that the tax increases weren’t higher, which suggests that tax assessments are lagging behind rising property values and will likely continue to go up in 2022.”

The study by ATTOM found that in almost three-quarters of the U.S., the tax levels went up faster than the national average in the past year.

According to their data analysis, total taxes rose as high as they did “because home values went up far faster than taxes around the country,” causing effective tax rates to decline. Median home values spiked by about 10%, according to ATTOM, due to the tight supply of homes for sale compared to the number of buyers.

To encourage more home purchases, the Federal Home Financing Agency increased loan limits for prospective buyers. In some areas, residents can apply for loans as high as $970,800 if the market is one of 100 U.S. metros deemed “higher-cost.” Other potential homeowners can get as much as $647,000 in 2022 for a federally backed mortgage. The increased amounts were intended to address issues with rising prices while wages stagnated, comparatively.

For longer-term strategy to address housing issues, FHFA said some of its tools are limited for relief. It noted those concerns in its 2022 to 2026 strategic plan, published April 14.

“The agency’s ability to affect the supply of affordable housing for low- and moderate-income households is limited, and the market is constrained by shortages,” FHFA said. “Both labor shortages and materials supply-side challenges reduce the affordability of new housing construction and the renovation of existing housing.”

The agency said as mortgage rates increase from the lows set during the COVID-19 pandemic, with more increases to follow through 2024, the rising rates could add to affordability concerns for new borrowers as the housing supply remains tight.

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