Wealthy Living

Wealthy Homebuyers on Large Budgets are Losing Spending Power - Report

It’s no secret that buying into the housing market has become increasingly more difficult

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.

Let’s examine what this significant change means and whether it spells an upcoming market crash.

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.

Since mortgage rates determine the size of monthly payments — and a buyer’s ability to afford a mortgage largely depends on whether monthly payments are within their budget — this is a huge blow to buyers.

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. For one, many people will now be priced out of the market and forced to continue renting.

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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