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.
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.
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.
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.