October, 2022 -- Mortgage rates pricing millions out of buying a home

The U.S. real estate market was already tough for prospective buyers, who have faced double-digit price increases and cutthroat competition for listed properties. Now they are facing another challenge as rising mortgage rates add to the affordability squeeze. The average mortgage rate jumped to 6.5% in September. That's more than three percentage points higher since the beginning of the year, when rates were hovering at about 3.2%. Not only have new loans decreased but loan applications as well. Adding to the crunch is the nations central bank restricting the supply of money to fight inflation. The rapid increase in home prices during the pandemic has pushed the dream of homeownership beyond the means of many middle-class Americans, who increasingly are bidding against investors and higher-income buyers for a limited pool of homes. Only about 40% of renters who are millennials whose generation is now the biggest buyers of homes can afford to buy a starter home under today's rates, compared with 50% a year earlier.

A. Construct a money market for home mortgages, labeling initial supply and demand curves and quantity with subscript 1 and setting into the market actual average interest rate in January 2022.

B. Cite a 10-20 word phrase from the article that speaks to a change in demand for mortgage loans.

C. State one economic factor that likely changed demand consistent with information in the article.

D. Cite a 10-20 word phrase from the article that speaks to a change in supply of mortgage loans.

E. State one economic factor that likely changed supply consistent with information in the article.

F. Return to the market and make changes to the market consistent with information in the article and with your answers in 4B and 4C, labeling new supply and demand curves and new quantity with subscript 2 and setting into the market new actual average interest rate.