Mortgage rates on a 30-fixed loan have reached 8%, the highest since 2000. In perspective, a home for sale at $400,000 would carry a monthly mortgage payment of over $3,500, compared to less than $1,500 when mortgage rates were at 3%. In each case, the down patent would be $80,000. Other closing costs would take that to $90,000.
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If the buyer of a $400,000 home had an income of $150,000, that would likely be $110,000 after taxes or $9,600 monthly. The house also carries property taxes and insurance, which the buyer would have in either case. But that could quickly put the monthly price of ownership at $5,000. That does not leave much for transportation, food, fuel, clothing and other issuance. This means the buyer with an 8% mortgage and $150,000 income can barely afford a $400,000 house. (You can buy most homes in these 23 cities for less than $125,000.)
The buyer of the $400,000 house has another problem. There are ever fewer in that price range as people hold their homes, particularly the ones they bought with 3% 30-year fixed-rate mortgages. The number of people holding their homes at these mortgage rates has more incentive as interest rates rise. They have a low rate of owning prime property.
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