How Rising Mortgage Rates Effect Buying Power: How much more do you need to make to buy your dream home is really a guide for how to frame your buying and spending before purchasing a home. Are you thinking about buying a home but not sure how much you can afford? I represent buyers on The Main Line PA and I wanted to offer some expertise on how to understand what mortgage rates mean for buying power. First, here are my quick Q and A on the state of the market on The Main Line. Are you able to buy your dream home on The Main Line? Certainly. Are there more homes coming to the market? Absolutely. Are homes being more competitively priced? Yes. Will I need to save more for a down payment, I recommend it. Now to the details on buying power. Let’s look at some numbers recently calculated by Realtor.com that offer some explanation on how affordable housing is using the median home price in the US.
A median priced home is $427,250 in the US according to realtor.com data in September. Mortgage rates have nearly doubled from 3% to nearly 7% according to Fannie Mae. This means that in order to afford a median priced home, buyers would need to make roughly $124,000, whereas a year ago, buyers would need to only make $89,000. This difference is significant because it means that 3 out 4 families can no longer afford a mortgage and around 20 million households are priced out of the median priced home. Respectively, if rates go up to 8% buyers would need an annual household income of $137,356 for a median-priced U.S. home and at 10%, they would need to bring home nearly $160,000 a year. This gives you an idea how how rates are affecting affordability. If you are looking for a home, buying now is still the best option. Why? With inflation comes increases in rents as well. Renting is rarely as affordable as owning and The Main Line PA is a stable housing market, with listings that commonly sell off market. My Main Line buyers are taking advantage of the stability of The Main Line market and how it is priced compared to other metropolitan areas. And please note that this does not apply for everyone. Especially in our market, many buyers are finding that buying in cash is a much simpler way to purchase a home and can get a great value. If you are looking to buy and are concerned that the timing may not be right or that you will not find a home that suits your needs, please reach out. I specialize in helping buyers just like you find homes on The Main Line.
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