Car rates

Rising interest rates put buyers of unfinished homes at financial risk. : NPR

Mortgage rates rose sharply as supply chain delays slowed construction. This has many people in an expensive bind – some cannot afford the house they agreed to buy 6 months ago.

David J. Phillip/AP


hide caption

toggle caption

David J. Phillip/AP


Mortgage rates rose sharply as supply chain delays slowed construction. This has many people in an expensive bind – some cannot afford the house they agreed to buy 6 months ago.

David J. Phillip/AP

These days, Ari Brooks really tries not to think about mortgage rates.

“I try not to, because it gives me a lot of anxiety,” she says. Brooks and her family live just outside of Boise, Idaho, which has become one of the toughest places in the entire country to buy a home.

People have moved there in droves, driving prices up 82% in the past three years alone, according to data from the National Association of Realtors.

So, after bidding again and again, she and her husband TR Brooks decided to buy a house from a home builder before it was built.

“It looked very attractive as long as there is no bidding war,” he says. “There’s a price you agree on. And it doesn’t go up while you wait for it to be built.”

Ari and TR Brooks were on the land where their new home would be built the day they agreed to buy it back in February 2021. But the house is still not complete and mortgage rates have risen dramatically.

TR Brooks


hide caption

toggle caption

TR Brooks


Ari and TR Brooks were on the land where their new home would be built the day they agreed to buy it back in February 2021. But the house is still not complete and mortgage rates have risen dramatically.

TR Brooks

So they signed a contract to buy a house for $430,000.

But that was a year and a half ago. They thought it would take about 9 months to complete the house. But labor shortages and pandemic supply chain delays have left builders waiting on everything from roof trusses to windows and doors. During this time, interest rates jumped enormously, from around 3% to around 6%.

Higher mortgage rates make the same house much more expensive.

The couple are lucky that when rates started to rise, they locked in a mortgage rate for 11 months with the homebuilder’s loan division. Most lenders don’t even offer such long-term rate locks.

“We have a rate lock that is in the high 3s,” Ari says.

But that expires in a few months, and their house is still not finished. And if their rate lock expires, buying the home will become much more expensive with today’s higher mortgage rates.

On a $400,000 loan, that adds over $500 per month to the mortgage payment.

Many new home buyers are currently being affected by this price shock.

“I mean, this is real life,” says Kenny Parcell, a real estate agent in Spanish Fork, Utah, who says he works with young families facing the same situation. “[It’s] the dream of home ownership and they’re watching it go.”

$30,000 in-game deposits

Parcell says some of his clients have signed contracts to buy homes, but now they can’t qualify for a mortgage to buy the same home they could afford just six months ago.

“We had 10 people we worked with canceling,” he says. “There are a lot of tears shed, you have real empathy for these people.”

Parcell says the families put down deposits of $20,000 or $30,000 when they agreed to buy the house. Now they could lose that money.

“Some builders are willing to give that back,” Parcell says, because they view the situation as a hardship and think they can sell the house for more now anyway.

“Other builders have said, sorry,” he says. “It was non-refundable.”

So he says people are scrambling, pleading to try to get the money back. Some try to borrow money from family members to help them buy the house.

NPR wants to hear from you if you are in this situation. Click here to tell us your story

Others consider variable rate loans which have lower monthly payments, but this comes with the risk of higher payments if rates continue to rise.

Meanwhile, Parcell says people are still stuck in renting and many landlords are raising rents.

“They can’t afford to stay in their rental and they can’t afford to lose their building deposit or their deposit,” he says. “They’re in real trouble.”

Save for a bigger down payment

Back in Boise, Ari and TR Brooks are in better shape. TR is a professor of psychology. Ari is a social worker. So they have solid incomes and even if they’re hit by that much higher mortgage payment, they could still afford to buy the house. It would be very tight money though.

“We have a child in full-time daycare,” Ari says, adding that they are already feeling the rising cost of gas and groceries and the general inflation in the economy right now.

“We also have a car which is a bit of a ticking time bomb,” her husband says. “We have expenses coming up.”

Meanwhile, the couple have been saving whatever they can for a bigger down payment, so they can borrow less money for their mortgage if they have to pay that much higher interest rate.