Housing Market has Begun to Fall


Increasing interest rates and higher inventory levels indicate the housing market is falling. 80% of the US is about to be affected.

There are a lot of factors that justify the decline of real estate, let’s look at those factors.

Home Affordability is estimated to be the worst in the last 37 years. Fed increasing the interest rates has caused dramatic increases in mortgage interests which has pushed a lot of people out of the housing market. It takes about 35.5% of the median income to pay the principal and interest amount. This is estimated to be the highest payment-to-income ratio since 1985. For context, it takes about 324000 more to pay for a 500,000 mortgage for a period of 30 years due to interest hikes.

Home builders are considering selling in bulk to reduce the inventories as many buyers back out. Rising inflation and the possibility of a recession have pushed new buyers to hold back which caused new house inventories to go sharply up.

Despite the decreasing demand and increasing interests, however, the buyers who locked the mortgage at lower interests are less likely to give up unless shaken by the increased risk of financial stability

In a nutshell, there are clear signs of the housing market is on the path to decline however it might not happen very quickly but might be more clear in the months to follow.

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