Redfin Report Finds Even Homebuyers on Large Budgets Are Losing Spending Power

It’s no secret that buying into the housing market has become increasingly more difficult (read: expensive).

After years of a red-hot market and prices rising exponentially, real estate has seen increasing interest rates due to attempts to get inflation under control.

Unsurprisingly, this has had significant knock-on effects for potential homebuyers who face higher mortgage rates.

A report by Redfin found that a buyer with a budget of $2,500 can now afford a $400,000 house with current interest rates, compared to a property worth $517,000 a few months back.

What the Redfin Report Found

The average mortgage rate for a 30-year fixed-rate mortgage is now just under 6%.

In contrast, average mortgage rates were hovering around the 3% mark in 2021 — quite the quick turnaround.

The change comes after the Federal Reserve increased its fund rate in June 2022 (following previous increases), causing mortgage rates to rise too.



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When the average mortgage rate was 3%, a buyer with a budget of $2,500 for monthly payments could afford a house worth $517,500. Now mortgage rates are 6%, making monthly payments of $2,500 would mean you can “only” afford a house worth $399,750. That’s a drop of $118,000 in spending power.

Is This a Sign a Housing Market Crash is Coming?

Amid such difficult conditions, it’s only natural to wonder if a housing market crash will be the natural outcome. The average house price in the US is $507,800, so the drop in affordability means that even buyers with a healthy monthly budget of $2,500 will not afford the average property.

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