Seattle-(Business wire)-(NASDAQ: RDFN) — Home buyers of $ 2,500 a month have lost nearly $ 120,000 in purchasing power since the end of last year as mortgage rates have nearly doubled. report From Redfin (redfin.com), Real estate brokerage utilizing technology.
The buyer can afford a $ 399,750 home with today’s mortgage rate of around 6%. That’s a staggering $ 117,750 less than a $ 517,500 home that could have been purchased for the same budget at the end of last year, when prices were close to a record low of 3%. In other words, monthly payments for a $ 399,750 home will rise by more than $ 500 as the mortgage rate rises from $ 1,931 to $ 2,500.
Nationally, 45.6% of homes are affordable with a monthly budget of $ 2,500 at a 6% interest rate. By comparison, if the rate is still 3%, 61.6% is affordable. This is a 20% down payment, a 30-year mortgage, a 1.25% fixed asset tax rate, a 0.5% homeowners insurance rate, according to a Redfin analysis of homes for sale from May 15th to June 15th. It is assumed that there is no HOA membership fee.
“I need a higher mortgage rate cool down A bright red housing market.They are already Delay the competitionBut they’re putting buyers in a tough situation, “said Darryl Fairweather, Chief Economist at Redfin. “More monthly payments mean that many house hunters now need to consider smaller homes. And for sellers, the low budget of homebuyers means they are no longer theirs. Means you can’t expect to get the best dollars for your home. ”
Rising mortgage rates also affect housing supply. For some potential sellers, selling a home and buying another home means exchanging a low mortgage rate for a high mortgage.
Mortgage rates have risen since January as the Federal Reserve aims to combat inflation. Last week alone, average 30-year fixed mortgage rates rose from 5.23% to 5.78%. This is the largest week-long rise since 1987 as the Fed introduced the sharpest interest rate hike in nearly 30 years.
While 30-year mortgage rates have skyrocketed, buyers have other options. Homebuyers can consider floating rate mortgages. This is usually a low interest rate at the beginning of the period, but with risks. Buyers who choose a 6% interest rate can also refinance in the future if the interest rate drops.
Less than one-third of homes sold in Phoenix, Raleigh, Las Vegas, Salt Lake City and Austin are affordable with a 6% interest rate and a $ 2,500 monthly budget.
Homebuyers have less choice at 6% interest rates in all of the 50 most populous metropolitan areas in the United States, but Phoenix, Raleigh, Las Vegas, and Salt Lake were places where homebuying was thriving during the pandemic. It has the greatest impact in the city and Austin.
In Phoenix, 21.5% of homes for sale from May 15th to June 15th were reasonably priced with a monthly budget of $ 2,500 and a 6% interest rate. By comparison, if the rate is still 3%, about 50% is affordable. This is the biggest gap for all metros in this analysis. In Raleigh, 33.2% of homes are affordable at 6%, 61.1% are 3%, and in Las Vegas they are 30.7%, 56.7%. 11% of Salt Lake City sellers are affordable at 6% compared to 36.4%, and 13.6% compared to 38.4% in Austin.
The Bay Area has the least impact, as few affordable homes have a budget of $ 2,500, regardless of interest rates.
To view a complete report with a metro-level affordable breakdown, visit: https://www.redfin.com/news/rising-mortgage-rates-purchasing-power-drops-2022/
Redfin (www.redfin.com) Is a real estate company that utilizes technology. We help people find a place to live with brokerage, immediate home buying (iBuying), renting, lending, title insurance, and home remodeling services. We sell our homes for more money and charge half the price. We also operate the number one real estate brokerage site in Japan. Our homebuying customers first see the home on an on-demand tour and our lending and title services help them close quickly. Customers selling homes can either get an immediate cash offer from Redfin or have a home remodeler repair the home and sell it for the highest price. Our rental business allows millions of people across the country to find rental apartments and homes. Since its launch in 2006, we have saved over $ 1 billion in customer fees. We serve more than 100 markets in the United States and Canada and employ more than 6,000 people.
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