Yikes! Every Time Mortgage Rates Rise, Buyers Need To Make This Much More To Afford a Home
For home shoppers who thought 2022 would be their year, a pervasive sinking feeling is taking hold. They’re realizing the monthly payment for a home they thought they could afford—perhaps just barely—is now hundreds or even thousands of dollars more than they would have paid earlier this year. Their dream home is getting further and further out of reach.
The culprit: soaring mortgage interest rates.
The pain these higher rates have wrought on the housing market is already showing up in the high numbers of buyers who can no longer qualify for a mortgage—or are simply giving up as their purchasing power continues to plummet. Sellers are slashing prices or pulling their homes off the market. Home sales are dropping, and homes are sitting on the market longer.
And sure, we all realized that rising mortgage rates were going to mean higher monthly payments. But how much, exactly? We wanted to give prospective homebuyers a real road map to what’s going on—and what’s going to happen in the coming weeks and months. So the Realtor.com®data team crunched the numbers to find out just how much turmoil each mortgage rate increase is having on homebuyers.
How much does the pool of homebuyers shrink with each percentage point increase in the mortgage rate? And how much more do households need to earn in order to make monthly payments on a new home?
“People are just stopped in their tracks, watching, waiting to see what happens next,” says Rocke Andrews, a mortgage broker at Lending Arizona in Tucson. “It’s basically a frozen market until prices come down more or rates come down, or both.”