Higher mortgage rates
Redfin cites Freddie Mac data showing that 30-year mortgage rates in the U.S. are now at 5.51% — substantially higher than the 3.11% at the beginning of this year.
A higher mortgage rate translates to higher monthly payments on a same-sized loan.
Therefore, if you are planning to buy a house, a higher mortgage rate means you might not be able to afford the same house that you were eyeing earlier.
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Learn MoreHigh home prices
Redfin’s latest data suggests that property prices are no longer soaring: in the four-week period ended July 10, the median home sale price in the U.S. declined 0.7% from the peak during the four weeks ended June 19.
That said, at $393,449, the median home sale price still represented a 12% increase year over year. Meanwhile, the median asking price of newly listed homes rose 14% year over year to $397,475.
If you want to buy a home with the median asking price at the current mortgage rate, you’d be looking at a monthly mortgage payment of $2,387. A year ago — when homes were cheaper and mortgage rates were at 2.88% — you’d only need $1,663.
In other words, high home prices combined with higher mortgage rates mean you would need to budget 44% more for monthly payments.
Inflation
And Americans are already facing tight budgets due to inflation.
In June, the consumer price index rose 9.1% from a year ago, marking its fastest increase since November 1981. The index measures the prices for a basket of everyday goods and services related to the cost of living.
Inflation erodes our purchasing power. With consumer prices increasing substantially, people have less money to buy a home.
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Discover the secretFalling stock market
Finally, all of the above is happening when stocks are dropping to the floor.
U.S. equities had a strong rally in 2020 and 2021. But in 2022, sentiment has completely changed.
The S&P 500 Index is down 17% year to date, the Dow Jones Industrial Average slipped 12%, while the tech-laden Nasdaq Composite plunged 25% during the same period.
Considering the number of people that hold stocks — or have investments in funds that hold stocks — this market downturn has led to plenty of bleeding portfolios.
With this economic backdrop, some house hunters have no choice but to drop out of the market.
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