Rising Rates Forcing Buyers Into Smaller Homes - The MReport

Category: First Home Buyer News US
Original source: The MReport
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Sentiment Score: -0.15299
Published: Oct 5th, 2022
Rising Rates Forcing Buyers Into Smaller Homes - The MReport

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Rising mortgage rates, combined with continued high home prices, have cut more than 400-square feet out of homes affordable to San Diego homebuyers on a $3,000-per-month budget, according to the latest findings from Redfin.
The report found that a San Diego homebuyer with a $3,000 monthly budget can now only afford a 931-square-foot home as today’s mortgage rates edge toward the 7%-mark, down from the 1,366-square-foot home the same buyer could have purchased just one year ago, when rates were sitting near the 3%-mark.
The 435-square-foot difference in San Diego is the biggest of the 50 most populous U.
In San Diego, for example, home prices were up 7% year-over-year in August 2022, rising from a median of $749,000 to $800,000.
A San Diego buyer purchasing the median-priced home today would pay more than $5,000 per month with a 6.
Following San Diego, the Newark, New Jersey region experienced the largest decline in the size of home buyers can afford.
Rounding out the top five and trailing San Diego and Newark, was Nassau County, New York coming in at third (1,300-square feet, down from 1,712-square feet); Denver (1,571-square feet, down from 1,933-square feet); and Portland, Oregon (1,504-square feet, down from 1,800-square feet).

Rising Rates Forcing Buyers Into Smaller Homes - The MReport

Rising mortgage rates, combined with continued high home prices, have cut more than 400-square feet out of homes affordable to San Diego homebuyers on a $3,000-per-month budget, according to the latest findings from Redfin. The report found that a San Diego homebuyer with a $3,000 monthly budget can now only afford a 931-square-foot home as today’s mortgage rates edge toward the 7%-mark, down from the 1,366-square-foot home the same buyer could have purchased just one year ago, when rates were sitting near the 3%-mark. The 435-square-foot difference in San Diego is the biggest of the 50 most populous U.S. metros for buyers with a $3,000 monthly budget. But the sharp increase in mortgage rates to their highest level in 15 years is cutting into homebuyer budgets across the country. High rates are making monthly housing payments significantly more expensive, especially because home-sale prices in most areas remain higher than they were a year ago. Last week, Freddie Mac reported the 30-year fixed-rate mortgage (FRM) took another big step toward the 7%-mark, reporting the FRM averaging 6.70% with an average 0.9 point as of September 29, 2022, up from the previous week when it averaged 6.29%. A year ago at this time, the 30-year FRM averaged more than half that at 3.01%. “Soaring mortgage rates are throwing a wrench into prospective buyers’ plans,” said Redfin Senior Economist Sheharyar Bokhari. “Many would-be buyers are dropping out of the market because they can no longer afford the home they want, resulting in a dramatic dip in home sales. For buyers who need a home right now—and can still afford it—compromise is the name of the game. Some buyers will choose to sacrifice on location or move further away from the city center so they can get the space they want, while others will settle on a smaller home in their ideal location.” Further exacerbating the homebuyer dilemma, are continued inflationary concerns, as the typical homebuyer’s monthly mortgage payment has climbed $337—or 15%—over the past six weeks to a new high of $2,547, according to Redfin. Redfin economists forecast that rising mortgage rates should theoretically cause home prices to fall enough to compensate for the additional monthly interest cost, which would mean buyers could afford the same-sized home. But as home prices have fallen from their 2022 peak in most metros, they haven’t fallen from a year ago anywhere except the Bay Area and a few other places–largely because of a lack of housing supply. In San Diego, for example, home prices were up 7% year-over-year in August 2022, rising from a median of $749,000 to $800,000. Homebuyers’ monthly housing payments would be more expensive even without higher mortgage rates, but with rates more than doubling, they’re significantly more expensive. A San Diego buyer purchasing the median-priced home today would pay more than $5,000 per month with a 6.7% rate, up from about $3,500 for last year’s median-priced home with a 3% rate. That means buyers need to search for cheaper homes, which typically translates to smaller ones. Following San Diego, the Newark, New Jersey region experienced the largest decline in the size of home buyers can afford. A Newark buyer on a $3,000 monthly budget was able to afford a 1,726-square-foot home today, down from 2,156 square feet just year ago. Rounding out the top five and trailing San Diego and Newark, was Nassau County, New York coming in at third (1,300-square feet, down from 1,712-square feet); Denver (1,571-square feet, down from 1,933-square feet); and Portland, Oregon (1,504-square feet, down from 1,800-square feet). As mortgage rates have more than doubled, that phenomenon has cut at least 100-square feet out of the homes in would-be buyers’ price range in 29 of the 50 metros in Redfin’s analysis. Today, the typical home affordable on a $3,000 budget is under 1,000-square feet in six of the metros in the analysis: San Diego; San Jose; Anaheim, California; Oakland, California; San Francisco; and New York. A year ago, just San Francisco fell into that category.
The Original Article can be found on The MReport

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