This is definitely part of the reason for the "frozen" real estate market right now.
A $400,000 home two years ago at 3.5% for 30 years = $1,437 P&I (20% down)
A $400,000 home today at 7% for 30 years = $2,129 P&I (20% down)
If you're looking for that same $1,437 payment today, it only buys you a $280,000 home.
Problem is, sellers don't want to reduce their prices and buyers are looking for affordable payments. Reducing interest rates simply papers over the fact that the asset is overly inflated in value.
Price discovery fixes this problem, but it is going to be a slow adjustment.
Quote:
Originally Posted by dreamingat30fps
Part of the lack of supply I think is the higher rates. If you are paying 2-3% why would you want to sell your house and get into a much higher rate loan unless you absolutely had to.
I'm sort of in that camp. I would like to sell our FL home and buy something else further north maybe with an acre or so. While my home is paid off any home that would be worth the move for us is now a million dollars or more. Considering our home is worth probably around $600k that means I would still have to come up with another $400k or so with some high interest rate loan. Just not worth it, especially when even at a million dollars the few properties that meet our needs are typically just meh. They certainly don't look like what a million dollar home looks like in my head.  |