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    Biden Seeks Housing Solutions Amid High Mortgage Rates

    The president and his team are seeking ways to help Americans afford to rent and buy homes, as high borrowing costs dampen views of the economy.President Biden and his economic team, concerned that elevated mortgage rates and housing costs are hurting Americans and hindering his re-election bid, are searching for new ways to make housing more available and affordable.Mr. Biden’s forthcoming budget request will call on Congress to pass a raft of initiatives to build more affordable housing and help certain Americans afford to purchase a home. The president is also expected to address housing affordability for both homeowners and renters in his State of the Union address next week, according to people familiar with the speech planning.On Thursday, administration officials announced a handful of relatively modest executive actions, including steps to increase the supply of manufactured homes. White House officials said this week that they would announce “additional actions we are taking to lower housing costs.”The increased focus on housing affordability comes as congressional Republicans assail Mr. Biden over high mortgage rates and housing costs, and as allies of the president warn that those costs are hurting working-class voters he needs to win in November.There is little Mr. Biden can do immediately and directly to affect mortgage rates. Those are heavily influenced by the Federal Reserve’s interest rate policies, and the White House is careful not to appear to be pressuring the central bank to cut rates. Fed officials have signaled that they expect to begin cutting rates this year.New research from economists at Harvard University and the International Monetary Fund — including Lawrence H. Summers, the former Treasury secretary — suggests high mortgage rates and other borrowing costs are contributing to Americans’ relatively gloomy mood about the economy, despite low unemployment and healthy growth. By weighing on consumer confidence, those costs could be depressing Mr. Biden’s re-election hopes.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Housing Costs Are Running Hot, but Is the Data Missing a Cooling Trend?

    Pandemic disruptions may have muddled the measurement of home prices in inflation data. That could complicate the Fed’s course on interest rates.The Federal Reserve may have a housing problem. At the very least, it has a housing riddle.Overall inflation has eased substantially over the past year. But housing has proved a tenacious — and surprising — exception. The cost of shelter was up 6 percent in January from a year earlier, and rose faster on a monthly basis than in December, according to the Labor Department. That acceleration was a big reason for the pickup in overall consumer prices last month.Listen to This ArticleOpen this article in the New York Times Audio app on iOS.The persistence of housing inflation poses a problem for Fed officials as they consider when to roll back interest rates. Housing is by far the biggest monthly expense for most families, which means it weighs heavily on inflation calculations. Unless housing costs cool, it will be hard for inflation as a whole to return sustainably to the central bank’s target of 2 percent.“If you want to know where inflation is going, you need to know where housing inflation is going,” said Mark Franceski, managing director at Zelman & Associates, a housing research firm. Housing inflation, he added, “is not slowing at the rate that we expected or anyone expected.”Those expectations were based on private-sector data from real estate websites like Zillow and Apartment List and other private companies showing that rents have barely been rising recently and have been falling outright in some markets.For home buyers, the combination of rising prices and high interest rates has made housing increasingly unaffordable. Many existing homeowners, on the other hand, have been partly insulated from rising prices because they have fixed-rate mortgages with payments that don’t change from month to month.The Housing ConundrumHousing costs, as measured in the Consumer Price Index, are still rising faster than before the pandemic, even as overall inflation has eased.

    Source: Labor DepartmentBy The New York TimesA Wider GapAfter surging in 2021 and 2022, rent growth has moderated. But the slowdown has been more gradual for single-family homes than for apartments.

    Notes: Data is shown as a 12-month change in a three-month moving average. “Houses” include both attached and detached single-family homes.Source: ZillowBy The New York TimesWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    How Nevada Is Pushing to Generate Jobs Beyond the Casinos

    Before the pandemic brought everyday life to a halt, Joe Kiele supported himself through the industry that dominates Nevada’s economy. He waited tables at a steakhouse inside a casino in Reno.Four years later, Mr. Kiele, 49, remains in Reno, yet he now spends his workday inside a factory. In place of worrying about the doneness of a customer’s rib-eye, he trains people on the proper handling of industrial chemicals.His employer, Redwood Materials, is constructing an enormous complex across a lonely stretch of desert. There, the company has begun recycling batteries harvested from discarded smartphones and other electronics. It extracts critical minerals like nickel, lithium, copper and cobalt, and uses them to manufacture components for electric vehicle batteries.Not coincidentally, the plant sits only eight miles from a major customer — a Tesla auto factory.Mr. Kiele’s shift from restaurant server to chemical operator parallels a transformation long championed by Nevada’s leaders seeking to make their economy more diverse, reducing its reliance on the hospitality industry for jobs. In recent years, they have tried to secure investment from companies engaged in the transition toward green energy.The Redwood Materials plant, which occupies roughly 300 acres and is expected to require some $2 billion in investment over the next decade, looms like a monument to Nevada’s aspirations. For the employees, the factory is evidence that there are ways to pay bills besides dealing cards and delivering food.“We’re not based on consumerism,” Mr. Kiele said. “We’re dealing with industry.”This is not the first time that Nevada has sought to broaden its economy. The state has a history of betting its fate on the bounty flowing from a single industry.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Why Are Americans Wary While the Economy Is Healthy? Look at Nevada.

    Toni Irizarry recognizes that the economy has improved. Compared with the first wave of the pandemic, when Las Vegas went dark, and joblessness soared to levels not seen since the Great Depression, these are days of relative normalcy.Ms. Irizarry, 64, oversees a cafe at the Orleans Hotel and Casino, a property just off the Las Vegas Strip that caters mostly to locals. Guests have returned, filling the blackjack and roulette tables amid the cacophony of jingling slot machines — the sound of money.She started in the hospitality industry busing tables when she was only 16. Her paychecks have allowed her to purchase a home, raise three children and buy each of them their first car. But as she contemplates the future, she cannot shake a sense of foreboding.The outlook of people like Ms. Irizarry could be crucial in determining who occupies the White House. Nevada is one of six battleground states that are likely to decide the outcome of November’s presidential election. Its economic centerpiece, Las Vegas, was constructed on dreams of easy money. That proved a winning proposition for generations of working people, yielding middle class paychecks for bartenders, restaurant servers, casino dealers and maids. Yet over the last two decades, a series of shocks have eroded confidence.Nevada remains heavily reliant on the willingness of people around the world to spend their money at casinos, restaurants and entertainment venues.First, a speculative bonanza in real estate went spectacularly wrong, turning the city into the epicenter of a national foreclosure crisis. The Great Recession inflicted steep layoffs on the hospitality industry, demolishing the notion that gambling was immune to downturns. Then in 2020, the pandemic turned Las Vegas into a ghost town.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    The Farmers Had What the Billionaires Wanted

    In Solano County, Calif., a who’s who of tech money is trying to build a city from the ground up. But some of the locals whose families have been there for generations don’t want to sell the land.When Jan Sramek walked into the American Legion post in Rio Vista, Calif., for a town-hall meeting last month, everyone in the room knew that he was really just there to get yelled at.For six years a mysterious company called Flannery Associates, which Mr. Sramek controlled, had upended the town of 10,000 by spending hundreds of millions of dollars trying to buy every farm in the area. Flannery made multimillionaires out of some owners and sparked feuds among others. It sued a group of holdouts who had refused its above-market offers, on the grounds that they were colluding for more.The company was Rio Vista’s main source of gossip, yet until a few weeks before the meeting no one in the room had heard of Mr. Sramek or knew what Flannery was up to. Residents worried it could be a front for foreign spies looking to surveil a nearby Air Force base. One theory held the company was acquiring land for a new Disneyland.Now the truth was standing in front of them. And somehow it was weirder than the rumors.The truth was that Mr. Sramek wanted to build a city from the ground up, in an agricultural region whose defining feature was how little it had changed. The idea would have been treated as a joke if it weren’t backed by a group of Silicon Valley billionaires who included Michael Moritz, the venture capitalist; Reid Hoffman, the investor and co-founder of LinkedIn; and Laurene Powell Jobs, the founder of the Emerson Collective and the widow of the Apple co-founder Steve Jobs. They and others from the technology world had spent some $900 million on farmland in a demonstration of their dead seriousness about Mr. Sramek’s vision.Rio Vista, part of Solano County, is technically within the San Francisco Bay Area, but its bait shops and tractor suppliers and Main Street lined with American flags can feel a state away. Mr. Sramek’s plan was billed as a salve for San Francisco’s urban housing problems. But paving over ranches to build a city of 400,000 wasn’t the sort of idea you’d expect a group of farmers to be enthused about.As the TV cameras anticipated, a group of protesters had gathered in the parking lot to shake signs near pickup trucks. Inside, a crowd in jeans and boots sat in chairs, looking skeptical.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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    High Housing Prices May Pose a Problem for Biden

    Buying a home is a less attainable goal for many young people, and rents are expensive. Could that dog Democrats in the 2024 election?Cameron Ambrosy spent the first weekend of December going to 10 open houses — purely for research purposes. The 25-year-old in St. Paul, Minn., has a well-paying job and she and her husband are saving diligently, but she knows that it will be years before they can afford to buy.“It is much more of a long-term goal than for my parents or my grandparents, or even my peers who are slightly older,” said Ms. Ambrosy, adding that for many of her friends, homeownership is even farther away. “There’s a lot of nihilism around long-term goals like home buying.”As many people pay more for rent and some struggle to save for starter homes, political and economic analysts are warning that housing affordability may be adding to economic unhappiness — and is likely to be a more salient issue in the 2024 presidential election than in years past.Many Americans view the economy negatively even though unemployment is low and wage growth has been strong. Younger voters cite housing as a particular source of concern: Among respondents 18 to 34 in a recent Morning Consult survey, it placed second only to inflation overall.Wary of the issue and its political implications, President Biden has directed his economic aides to come up with new and expanded efforts for the federal government to help Americans who are struggling with the costs of buying or renting a home, aides say. The administration is using federal grants to prod local authorities to loosen zoning regulations, for instance, and is considering executive actions that focus on affordability. The White House has also dispatched top officials, including Lael Brainard, who leads the National Economic Council, to give speeches about the administration’s efforts to help people afford homes.“The president is very focused on the affordability of housing because it is the single most important monthly expense for so many families,” Ms. Brainard said in an interview.Housing is “the single most important monthly expense for so many families,” noted Lael Brainard, director of the National Economic Council. Erin Schaff/The New York TimesHousing has not traditionally been a big factor motivating voters, in part because key market drivers like zoning policies tend to be local. But some political strategists and economists say the rapid run-up in prices since the pandemic could change that.Rents have climbed about 22 percent since late 2019, and a key index of home prices is up by an even heftier 46 percent. Mortgages now hover around 7 percent as the Federal Reserve has raised rates to the highest level in 22 years in a bid to contain inflation. Those factors have combined to make both monthly rent and the dream of first-time homeownership increasingly unattainable for many young families.“This is the singular economic issue of our time, and they need to figure out how to talk about that with voters in a way that resonates,” said Tara Raghuveer, director of KC Tenants, a tenant union in Kansas City, Mo., referring to the White House. The housing affordability crush comes at a time when many consumers are facing higher prices in general. A bout of rapid inflation that started in 2021 has left households paying more for everyday necessities like milk, bread, gas and many services. Even though costs are no longer increasing so quickly, those higher prices continue to weigh on consumer sentiment, eroding Mr. Biden’s approval ratings.While incomes have recently kept up with price increases, that inflationary period has left many young households devoting a bigger chunk of their budgets to rental costs. That is making it more difficult for many to save toward now-heftier down payments. The situation has spurred a bout of viral social media content about the difficulty of buying a home, which has long been a steppingstone into the middle class and a key component of wealth-building in the United States.That’s why some analysts think that housing concerns could morph into an important political issue, particularly for hard-hit demographics like younger people. While about two-thirds of American adults overall are homeowners, that share drops to less than 40 percent for those under 35.“The housing market has been incredibly volatile over the last four years in a way that has made it very salient,” said Igor Popov, the chief economist at Apartment List. “I think housing is going to be a big topic in the 2024 election.”Yet there are reasons that presidential candidates have rarely emphasized housing as an election issue: It is both a long-term problem and a tough one for the White House to tackle on its own.“Housing is sort of the problem child in economic policy,” said Jim Parrott, a nonresident fellow at the Urban Institute and former Obama administration economic and housing adviser. America has a housing supply shortfall that has been years in the making. Builders pulled back on construction after the 2007 housing market meltdown, and years of insufficient building have left too few properties on the market to meet recent strong demand. The shortage has recently been exacerbated as higher interest rates deter home-owning families who locked in low mortgage rates from moving.Some analysts think concerns about housing affordability could morph into an important political issue, particularly for hard-hit demographics like younger people.Mikayla Whitmore for The New York TimesConditions could ease slightly in 2024. The Federal Reserve is expected to begin cutting borrowing costs next year as inflation eases, which could help to make mortgages slightly cheaper. A new supply of apartments are expected to be finished, which could keep a lid on rents.And even voters who feel bad about housing might still support Democrats for other reasons. Ms. Ambrosy, the would-be buyer in St. Paul, said that she had voted for President Biden in 2020 and she planned to vote for the Democratic nominee in this election purely on the basis of social issues, for instance.But housing affordability is enough of a pain point for young voters and renters — who tend to lean heavily Democrat — that it has left the Biden administration scrambling to emphasize possible solutions.After including emergency rental assistance in his 2021 economic stimulus bill, Mr. Biden has devoted less attention to housing than to other inflation-related issues, like reducing the cost of prescription drugs. His most aggressive housing proposals, like an expansion of federal housing vouchers, were dropped from last year’s Inflation Reduction Act.Still, his administration has pushed several efforts to liberalize local housing laws and expand affordable housing. It released a “Housing Supply Action” plan that aims to step up the pace of development by using federal grants and other funds to encourage state and local governments to liberalize their zoning and land use rules to make housing faster and easier to build. The plan also gives governments more leeway to use transportation and infrastructure funds to more directly produce housing (such as with a new program that supports the conversion of offices to apartments).The administration has also floated a number of ideas to help renters, such as a blueprint for future renters’ legislation and a new Federal Trade Commission proposal to prohibit “junk fees” for things like roommates, applications and utilities that hide the true cost of rent.Some affordable housing advocates say the administration could do more. One possibility they have raised in the past would be to have Fannie Mae and Freddie Mac, which help create a more robust market for mortgages by buying them from financial institutions, invest directly in moderately priced rental housing developments. Ms. Raghuveer, the tenant organizer, has argued that the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, could unilaterally impose a cap on annual rent increases for landlords whose mortgages are backed by the agencies.But several experts said that White House efforts would only help on the margins. “Without Congress, the administration is really limited in what they can do to reduce supply barriers,” said Emily Hamilton, an economist at the Mercatus Center who studies housing.Republicans control the House and have opposed nearly all of Mr. Biden’s plans to increase government spending, including for housing. But aides say Mr. Biden will press the case and seek new executive actions to help with housing costs.While it could be valuable to start talking about solutions, “nothing is going to solve the problem in one year,” said Mark Zandi, chief economist of Moody’s Analytics and a frequent adviser to Democrats.“This problem has been developing for 15 years, since the financial crisis, and it’s going to take another 15 years to get out of it.” More

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    A 30-Year Trap: The Problem With America’s Weird Mortgages

    Buying a home was hard before the pandemic. Somehow, it keeps getting harder.Prices, already sky-high, have gotten even higher, up nearly 40 percent over the past three years. Available homes have gotten scarcer: Listings are down nearly 20 percent over the same period. And now interest rates have soared to a 20-year high, eroding buying power without — in defiance of normal economic logic — doing much to dent prices.None of which, of course, is a problem for people who already own homes. They have been insulated from rising interest rates and, to a degree, from rising consumer prices. Their homes are worth more than ever. Their monthly housing costs are, for the most part, locked in place.The reason for that divide — a big part of it, anyway — is a unique, ubiquitous feature of the U.S. housing market: the 30-year fixed-rate mortgage.That mortgage has been so common for so long that it can be easy to forget how strange it is. Because the interest rate is fixed, homeowners get to freeze their monthly loan payments for as much as three decades, even if inflation picks up or interest rates rise. But because most U.S. mortgages can be paid off early with no penalty, homeowners can simply refinance if rates go down. Buyers get all of the benefits of a fixed rate, with none of the risks.“It’s a one-sided bet,” said John Y. Campbell, a Harvard economist who has argued that the 30-year mortgage contributes to inequality. “If inflation goes way up, the lenders lose and the borrowers win. Whereas if inflation goes down, the borrower just refinances.”This isn’t how things work elsewhere in the world. In Britain and Canada, among other places, interest rates are generally fixed for only a few years. That means the pain of higher rates is spread more evenly between buyers and existing owners.In other countries, such as Germany, fixed-rate mortgages are common but borrowers can’t easily refinance. That means new buyers are dealing with higher borrowing costs, but so are longtime owners who bought when rates were higher. (Denmark has a system comparable to the United States’, but down payments are generally larger and lending standards stricter.)Only the United States has such an extreme system of winners and losers, in which new buyers face borrowing costs of 7.5 percent or more while two-thirds of existing mortgage holders pay less than 4 percent. On a $400,000 home, that’s a difference of $1,000 in monthly housing costs.“It’s a bifurcated market,” said Selma Hepp, chief economist at the real estate site CoreLogic. “It’s a market of haves and have-nots.”It isn’t just that new buyers face higher interest rates than existing owners. It’s that the U.S. mortgage system is discouraging existing owners from putting their homes on the market — because if they move to another house, they’ll have to give up their low interest rates and get a much costlier mortgage. Many are choosing to stay put, deciding they can live without the extra bedroom or put up with the long commute a little while longer.The result is a housing market that is frozen in place. With few homes on the market — and fewer still at prices that buyers can afford — sales of existing homes have fallen more than 15 percent in the past year, to their lowest level in over a decade. Many in the millennial generation, who were already struggling to break into the housing market, are finding they have to wait yet longer to buy their first homes.“Affordability, no matter how you define it, is basically at its worst point since mortgage rates were in the teens” in the 1980s, said Richard K. Green, director of the Lusk Center for Real Estate at the University of Southern California. “We sort of implicitly give preference to incumbents over new people, and I don’t see any particular reason that should be the case.”A ‘Historical Accident’The story of the 30-year mortgage begins in the Great Depression. Many mortgages at the time had terms of 10 years or less and, unlike mortgages today, were not “self-amortizing” — meaning that rather than gradually paying down the loan’s principal along with the interest each month, borrowers owed the principal in full at the end of the term. In practice, that meant that borrowers would have to take out a new mortgage to pay off the old one.That system worked until it didn’t: When the financial system seized up and home values collapsed, borrowers couldn’t roll over their loans. At one point in the early 1930s, nearly 10 percent of U.S. homes were in foreclosure, according to research by Mr. Green and a co-author, Susan M. Wachter of the University of Pennsylvania.In response, the federal government created the Home Owners’ Loan Corporation, which used government-backed bonds to buy up defaulted mortgages and reissue them as fixed-rate, long-term loans. (The corporation was also instrumental in creating the system of redlining that prevented many Black Americans from buying homes.) The government then sold off those mortgages to private investors, with the newly created Federal Housing Administration providing mortgage insurance so those investors knew the loans they were buying would be paid off.The mortgage system evolved over the decades: The Home Owners’ Loan Corporation gave way to Fannie Mae and, later, Freddie Mac — nominally private companies whose implicit backing by the federal government became explicit after the housing bubble burst in the mid-2000s. The G.I. Bill led to a huge expansion and liberalization of the mortgage insurance system. The savings-and-loan crisis of the 1980s contributed to the rise of mortgage-backed securities as the primary funding source for home loans.By the 1960s, the 30-year mortgage had emerged as the dominant way to buy a house in the United States — and apart from a brief period in the 1980s, it has remained so ever since. Even during the height of the mid-2000s housing bubble, when millions of Americans were lured by adjustable-rate mortgages with low “teaser” rates, a large share of borrowers opted for mortgages with long terms and fixed rates.After the bubble burst, the adjustable-rate mortgage all but disappeared. Today, nearly 95 percent of existing U.S. mortgages have fixed interest rates; of those, more than three-quarters are for 30-year terms.No one set out to make the 30-year mortgage the standard. It is “a bit of a historical accident,” said Andra Ghent, an economist at the University of Utah who has studied the U.S. mortgage market. But intentionally or otherwise, the government played a central role: There is no way that most middle-class Americans could get a bank to lend them a multiple of their annual income at a fixed rate without some form of government guarantee.“In order to do 30-year lending, you need to have a government guarantee,” said Edward J. Pinto, a senior fellow at the American Enterprise Institute and a longtime conservative critic of the 30-year mortgage. “The private sector couldn’t have done that on their own.”For home buyers, the 30-year mortgage is an incredible deal. They get to borrow at what amounts to a subsidized rate — often while putting down relatively little of their own money.But Mr. Pinto and other critics on both the right and the left argue that while the 30-year mortgage may have been good for home buyers individually, it has not been nearly so good for American homeownership overall. By making it easier to buy, the government-subsidized mortgage system has stimulated demand, but without nearly as much attention on ensuring more supply. The result is an affordability crisis that long predates the recent spike in interest rates, and a homeownership rate that is unremarkable by international standards.“Over time, the 30-year fixed rate probably just erodes affordability,” said Skylar Olsen, chief economist for the real estate site Zillow.Research suggests that the U.S. mortgage system has also heightened racial and economic inequality. Wealthier borrowers tend to be more financially sophisticated and, therefore, likelier to refinance when doing so saves them money — meaning that even if borrowers start out with the same interest rate, gaps emerge over time.“Black and Hispanic borrowers in particular are less likely to refinance their loans,” said Vanessa Perry, a George Washington University professor who studies consumers in housing markets. “There’s an equity loss over time. They’re overpaying.”‘Who Feels the Pain?’Hillary Valdetero and Dan Frese are on opposite sides of the great mortgage divide.Ms. Valdetero, 37, bought her home in Boise, Idaho, in April 2022, just in time to lock in a 4.25 percent interest rate on her mortgage. By June, rates approached 6 percent.“If I had waited three weeks, because of the interest rate I would’ve been priced out,” she said. “I couldn’t touch a house with what it’s at now.”Mr. Frese, 28, moved back to Chicago, his hometown, in July 2022, as rates were continuing their upward march. A year and a half later, Mr. Frese is living with his parents, saving as much as he can in the hopes of buying his first home — and watching rising rates push that dream further away.“My timeline, I need to stretch at least another year,” Mr. Frese said. “I do think about it: Could I have done anything differently?”The diverging fortunes of Ms. Valdetero and Mr. Frese have implications beyond the housing market. Interest rates are the Federal Reserve’s primary tool for corralling inflation: When borrowing becomes more expensive, households are supposed to pull back their spending. But fixed-rate mortgages dampen the effect of those policies — meaning the Fed has to get even more aggressive.“When the Fed raises rates to control inflation, who feels the pain?” asked Mr. Campbell, the Harvard economist. “In a fixed-rate mortgage system, there’s this whole group of existing homeowners who don’t feel the pain and don’t take the hit, so it falls on new home buyers,” as well as renters and construction firms.Mr. Campbell argues that there are ways the system could be reformed, starting with encouraging more buyers to choose adjustable-rate mortgages. Higher interest rates are doing that, but very slowly: The share of buyers taking the adjustable option has edged up to about 10 percent, from 2.5 percent in late 2021.Other critics have suggested more extensive changes. Mr. Pinto has proposed a new type of mortgage with shorter durations, variable interest rates and minimal down payments — a structure that he argues would improve both affordability and financial stability.But in practice, hardly anyone expects the 30-year mortgage to disappear soon. Americans hold $12.5 trillion in mortgage debt, mostly in fixed-rate loans. The existing system has an enormous — and enormously wealthy — built-in constituency whose members are certain to fight any change that threatens the value of their biggest asset.What is more likely is that the frozen housing market will gradually thaw. Homeowners will decide they can’t put off selling any longer, even if it means a lower price. Buyers, too, will adjust. Many forecasters predict that even a small drop in rates could bring a big increase in activity — a 6 percent mortgage suddenly might not sound that bad.But that process could take years.“I feel very fortunate that I slid in at the right time,” Ms. Valdetero said. “I feel really bad for people that didn’t get in and now they can’t.” More

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    How High Interest Rates Sting Bakers, Farmers and Consumers

    Home buyers, entrepreneurs and public officials are confronting a new reality: If they want to hold off on big purchases or investments until borrowing is less expensive, it’s probably going to be a long wait.Governments are paying more to borrow money for new schools and parks. Developers are struggling to find loans to buy lots and build homes. Companies, forced to refinance debts at sharply higher interest rates, are more likely to lay off employees — especially if they were already operating with little or no profits.Over the past few weeks, investors have realized that even with the Federal Reserve nearing an end to its increases in short-term interest rates, market-based measures of long-term borrowing costs have continued rising. In short, the economy may no longer be able to avoid a sharper slowdown.“It’s a trickle-down effect for everyone,” said Mary Kay Bates, the chief executive of Bank Midwest in Spirit Lake, Iowa.Small banks like Ms. Bates’s are at the epicenter of America’s credit crunch for small businesses. During the pandemic, with the Fed’s benchmark interest rate near zero and consumers piling up savings in bank accounts, she could make loans at 3 to 4 percent. She also put money into safe securities, like government bonds.But when the Fed’s rate started rocketing up, the value of Bank Midwest’s securities portfolio fell — meaning that if Ms. Bates sold the bonds to fund more loans, she would have to take a steep loss. Deposits were also waning, as consumers spent down their savings and moved money into higher-yielding assets.Higher Interest Rates Are Here More