Mortgage rates are back to seven percent, while average rent is stagnating at $1,850, the “biggest gap we’ve ever seen,” Reventure Consulting Nick Gerli revealed Tuesday.
Gerli, who also runs the most popular real estate channel on YouTube with more than four million subscribers, explained that the cost to buy a home in America is approaching $2,700 per month. This figure includes the costs associated with mortgage, tax, insurance and average maintenance.
The average cost to rent is around $1,850. “Something has to break,” Gerli said of the massive price differential. In follow-up tweets, Gerli argued that mortgage rates are most likely to break first and need to return to normal levels.
Mortgage rates back to 7%.
Meaning that the cost to buy a house in America is now approaching $2,700/month when including mortgage, tax, insurance, and maintenance.
Meanwhile, cost to rent is $1,850.
Biggest gap we’ve ever seen. Something has to break. pic.twitter.com/gC1ffJXKmL
— Nick Gerli (@nickgerli1) May 22, 2023
The next? Home prices. Right now, we exist in a bubble where anyone who purchased in the last few years is likely to have massively overpaid. Those who purchased more recently were also lured into high interest rates, meaning that buyers have overpaid for both their homes and their mortgages, neither of which can be refinanced once the home values go back down.
Thankfully, many Americans have finally realized how badly the mortgage industry is trying to screw them. Applications for home buyers in mid-May were at the lowest levels in 20 years, Gerli noted. As fewer and fewer people choose to go into debt for overvalued homes, the overall property market will start to sink (and it already is, per my data).
The US housing market just had its largest one-year drop in a decade
— Daily Caller (@DailyCaller) May 22, 2023
American greed, coated in a thin disguise of “keeping up with the Joneses,” is largely to blame for this crisis. None of y’all needed a new home, but everyone else got one, so you did too, even though you couldn’t afford it when you bought and you likely won’t be able to afford it in the near future.
This behavioral trend of greed has further spilled over into the banking system. Gerli pointed out that the last time mortgage rates hit seven percent, Silicon Valley Bank collapsed. Similarly, high mortgage rates bleed into consumer pockets through other means, such as credit card costs and car loans. (RELATED: ‘Selling Sunset’ Spells Doom For Housing Market)
Gerli bets that lower interest rates are in our future, but they sort of have to be. Otherwise, people across the country will be choosing between eating and heating come winter. Many will lose the homes they’re currently in and won’t be able to buy a new one. Personally, I think things are going to get a lot worse before they get better, and this is only the beginning.