More Americans are getting pushed out
It’s becoming increasingly difficult for prospective buyers to step into real estate, with mortgage rates stretching above 7% and market listings being squeezed by greater demand than supply.
Some wealthy buyers are sidestepping the issue of higher mortgage rates by paying in all cash, while others are making bigger down payments to get better terms on their loan. There are also those who are getting their parents to pitch in to help them with their down payment.
The housing affordability issue could also be widening the wealth gap as well — with homeowners who bought when mortgage rates were low, or prior to the COVID-19 pandemic, building wealth through rising equity from their properties, while others are uncertain they will ever be able to purchase a home.
“High mortgage rates are exacerbating inequality between people who own homes and people who don’t,” Redfin senior economist Sheharyar Bokhari said in a recent report.
“Home prices are roughly 40% higher now than before the pandemic homebuying boom, and soaring mortgage rates have made the divide even bigger by adding more to monthly payments.”
Some folks are sticking to renting instead of pursuing homeownership, despite rent prices surging over the years as well.
Rental platform Zumper’s national rent report reveals the national median price for a one-bedroom rental will cost around $1,500 each month, while you’ll need to cough up over $1,850 for a two-bedroom abode.
Meanwhile, the median monthly mortgage payment across the U.S. is around $2,750 a month at a 7.76% interest rate, according to Redfin.
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Several housing firms are forecasting home prices will continue to climb in 2024, possibly requiring even higher incomes to afford them.
In July, the NAR predicted home prices would rise by 2.6% in 2024, while Zillow researchers recently projected a price increase of just over 2% from September 2023 through September 2024.
Goldman Sachs also expects prices to grow by around 2% — and forecasts mortgage rates will remain over 7% as well.
Goldman analysts point to “historically low” inventory, while saying new listings are being added at the most sluggish pace on record. Sellers are reluctant to list their current homes and relinquish their low mortgage rates, further contributing to this issue.
“This ‘lock-in’ effect is projected to depress sales of existing homes to 3.8 million in 2024, the lowest level since the early 1990s,” the report said.
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