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Housing: How rising mortgage rates and low inventory impact homebuyers

Yahoo Finance reporter Ronda Lee joins Yahoo Finance Live to discuss the biggest obstacles homebuyers are facing today.

Video Transcript

BRAD SMITH: Here with more from senior reporter Ronda Lee. And Ronda, just help us go further into some of the effects that we're seeing here.

RONDA LEE: So this is what's happening. Most likely, many existing home buyers took advantage of the low interest rates to refinance their homes. So they're reluctant to enter the market again and get a higher rate. For example, if they have $100,000 mortgage at a 3% rate, they're paying about $3,000 a year in interest. If that same homeowner sells their home, buys again at $100,000 at 4%, they're going to be paying $4,500 in interest payments. So that's $1,500 more. So the thing for them is stay at 3%, lock it in, and don't enter the market again.

BRAD SMITH: So with low inventory, rising mortgage rates, and inflation, is it worth it to buy?

RONDA LEE: Economists say it is better to own than to rent. And here's why. They're like, home ownership is your best hedge against inflation. Rent increases year after year. Your mortgage payment stays the same. So homeowners have an edge when it comes to inflation and trying to combat that and have more money in their pockets.

BRAD SMITH: All right, I wish these economists would give me a down payment. Ronda, appreciate the time.