By NAHBNOW News
The recent rise in mortgage interest rates during the past two months has priced more than 1.3 million households out of the market for a median priced home, according to analysis by NAHB.
A new NAHB study has determined that 1.3 million households would be priced out of the market for a nationwide median priced home ($346,757) if mortgage interest rates rise by a quarter-point from 2.75% to 3%. In other words, potential buyers would be forced to set their sights lower than a median-priced home — or delay their home purchase altogether. Rates were at 2.73% at the end of January and are now slightly above 3%, according to Freddie Mac.
The study found that at considerably higher rates, the number of priced-out households tapers. For example, when mortgage interest rates increase from 5.25% to 5.5%, 1.1 million households are priced out of the market for a median-priced home. This diminishing effect happen because only a declining number households at the higher end of household income distribution will be affected. When interest rates are relatively low, a 25 basis-point increase would affect a larger number of households at the lower and more populous part of income distribution.
Another recent report from NAHB found that nearly 154,000 households would be priced out of the housing market for each $1,000 increase in the price of a home.