Here’s what high home prices mean for homebuyer purchasing power
Today’s Daily Download episode features an interview with HousingWire Real Estate Reporter Julia Falcon. In this episode, Falcon discusses her recent article that claims rising home prices have erased the increased purchasing power homebuyers gained in early 2020.
For some background on the story, here’s a summary of the article:
Homebuyer purchasing power increased 6.9% this July, meaning a homebuyer with a $2,500 monthly housing budget can afford a home priced $33,250 higher than a year ago, Redfin found, which it credited to historically low mortgage rates.
But with home prices up 8.2% year over year in July, this homebuyer purchasing power is essentially canceled out, data from Redfin shows.
“Low mortgage rates are motivating many people to purchase a home, particularly those who want more space to work from home,” Redfin Chief Economist Daryl Fairweather said in a release. “But because there hasn’t been an increase in the number of homes for sale since rates started dropping with the onset of the pandemic, many buyers end up competing for the same homes, driving up prices.”
During the podcast interview, Falcon delves into how the COVID-19 pandemic and historically low mortgage rates have impacted the nation’s housing inventory.
“These low rates are increasing purchasing power, so for instance, if the mortgage rate is about 3%, a homebuyer can afford a slightly higher mortgage payment,” Falcon said. “This is encouraging people to buy, especially first-time buyers who might be able to afford a mortgage payment a little higher than they believed they would.”
Falcon also shares what homebuyer migration means for the overall real estate market, as well as what trends she’s currently watching.
The Daily Download examines the most compelling articles reported by the HousingWire newsroom team. Each afternoon, we provide our listeners with a deeper look into the stories coming across our newsroom that are helping Move Markets Forward. Hosted by the HW team and produced by Alcynna Lloyd and Victoria Wickham
HousingWire articles covered in this episode: