Despite falling prices, housing in the U.S. is still unaffordable for most buyers
Analysts have made a forecast for the U.S. real estate market. According to it, this year, home prices in the U.S. will fall by about 6% after declining in the previous period by 12%. However, even with this drop, local apartments and houses will not become affordable for most Americans. Home prices have increased by 40% over 2020-2021 alone, so the decline won’t play much of a role in purchasing power.
It is worth noting that the value of properties in the U.S. residential real estate market has doubled over the past 10 years. Most likely, the rise in price would have continued had it not been for rising interest rates. Over the past year, mortgage rates have doubled. If at the beginning of 2022 they were at 3.3%, by the end of it the size reached more than 7%
Analysts predict that the national average home prices this year will fall by almost 6%. Thus, in 2023 the U.S. housing market may experience the first sagging value in 10 years. Experts say that the increase in home and apartment prices over a long period made the purchase of a real estate for U.S. citizens extremely difficult. The situation was exacerbated by rising interest rates on mortgages. Therefore, in order for housing in the country to become affordable to a large number of buyers, its price must fall by about 20% of the peak values.
After the Federal Reserve’s latest interest rate review, the average mortgage loan rate crossed the 7% mark. This is the first time in nearly 20 years. Now, when a borrower takes out a 30-year home loan, he or she must pay a rate of 7.08%. For comparison, in 2021 the rate for a similar mortgage was 3.14%.
Prior to that, rates were above 7% in the spring of 2002, when the U.S. was experiencing a crisis after September 11. Experts note that the interest rate was not so high even during the financial crisis of 2008.
Americans now have to pay monthly loan payments that are 78% higher than in 2021. With a mortgage of $300,000, the payment has increased from $1,265 to $1,996. And buyers must pay a down payment of 20 percent of the total value of the property. As a result of rising rates, it has become increasingly difficult for middle-income people to repay their loans, and many consumers are forced to put off buying a home in the hope that mortgage terms will become more affordable after a while.