NEW YORK–When it comes to homeownership, “math no longer works,” according to one new analysis.
“Many would-be buyers were already feeling stretched thin by home prices that shot quickly higher in the pandemic, but at least mortgage rates were low,” the Wall Street Journal reported. “Now that they are high, many people are just giving up.:
The report states it is now less affordable than any time in recent history to buy a home, and the “math isn’t changing any time soon. Home prices aren’t expected to go back to prepandemic levels.”
Even though mortgage rates slipped to about 7% last week, the lowest in several months, they are still more than double what they were two years ago, the Journal pointed out.
‘Not This Time’
“Typically, high mortgage rates slow down home sales, and home prices should soften as a result. Not this time,” the Journal analysis stated “Home sales are certainly falling, but prices are still rising—there just aren’t enough homes to go around. The national median existing-home price rose to about $392,000 in October, the highest ever for that month in data that goes back to 1999.”
As any credit union loan officer knows, and as the Journal reminded, increases in mortgage rates add up fast over the life of a loan, potentially adding up to hundreds of thousands of dollars more in interest over the life of a standard 30-year loan.
Less Home for the Dollar
“That means buyers get a lot less home for their dollar. Before the Fed started raising rates, a person with a monthly housing budget of $2,000 could have bought a home valued at more than $400,000,” the Journal reported. “Today, that same buyer would need to find a home valued at $295,000 or less.”
The result, the report reminds, is first-time and young buyers are still “stuck on the sidelines.” Even with rising rental costs, mortgage rates and home prices have risen even faster, the analysis notes. As a result, the median first-time buyer was 35 years old in 2023, the second-highest on record, behind only 2022’s peak of 36 years old.
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