Back in March, when the average mortgage rate was still "only" 4.5%, we anticipated the coming rate explosion and warned that "Housing Affordability Is About To Crash The Most On Record."

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Fast forward to today when the latest 30Y average mortgage has just surged to a stunning 6.13% from 3.25% at the start of the year ...

... the highest rate since the great housing crash of 2007/2008, in the process sending housing affordability - just as we warned - to the lowest on record.

Alas, it's about to get even lower, because a simple back of the envelope calculation reveals that the jump in mortgage rates from 3.25% to 6.13% means that new homebuyers face an average monthly payment on a typical new $350,000 mortgage (the median existing home sale price is just under $400K) that has gone up from $1523 to $2128, a 40% increase in 6 months!

Another way of putting this: at a 6.13% mortgage (and rates will still keep rising for a long time with the Fed now set to hike between 125bps and 150bps in the next two months), the average home price needs to fall 30% to reach pre-covid affordability.

Whether it was intended or not, the Fed is about to unleash the biggest housing crisis since the bursting of the 2007 bubble. It also means that in a few weeks, the Fed's scramble to undo the damage it has done to the US economy will make March 2020 seems like a walk in the park.