Six weeks of rising rates cut deeply into buyers' budgets
Rising mortgage rates have put a significant dent in the purchasing power of homebuyers, with a new report from Redfin showing that buyers with a $3,000 monthly budget have lost over $33,000 in purchasing power in just six weeks.
The average 30-year fixed mortgage rate hit 7% on October 28, up nearly a full percentage point from 6.11% in mid-September.
For a buyer aiming to stay within a $3,000 budget, this jump means they can now afford a home priced at $442,500, down from $475,750 last month. While this is an improvement from April’s peak rates at 7.5%, many buyers have been left frustrated by the quick shift.
To put it simply, this rate hike translates to a monthly mortgage payment of $2,895 on a median-priced $428,000 home, about $200 more than buyers would have paid six weeks ago.
Rates add pressure in swing states
The impact of rising mortgage rates is also felt in several swing states where housing affordability is an especially significant issue.
In states like Nevada and Arizona, where the median home prices exceed the national average, a typical buyer with a $3,000 budget has lost about $33,000 in purchasing power over the past six weeks.
In states with more moderate prices, like Georgia and North Carolina, buyers with a $2,500 budget now face a $27,750 drop in purchasing power, as they’re limited to homes costing around $368,750 at the new rates.
In Michigan, Pennsylvania, and Wisconsin, where home prices and budgets are generally lower, the recent rate hikes mean that a buyer with a $2,000 monthly budget now has $22,250 less purchasing power than just six weeks ago, limiting them to homes priced around $295,000.
Read next: Redfin: Affordability, political factors drive migration from blue to red counties
“My advice for buyers is to focus on finding a house they love and try to negotiate on things they have some control over, like the sale price and home repairs,” Chen Zhao, economic research lead at Redfin, said in the report. “Sellers should know Redfin agents are reporting that there are buyers out there, but they’re mostly looking for move-in ready homes in good condition.”
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