US Mortgage Rates have risen from levels near 2% to 2.25% earlier in 2021 to levels now above 3%. This increase in the cost of borrowing money for home purchases has a downward effect on home prices and sales. The affordability of homes is directly related to the sales price and the cost of the mortgage to secure the purchase of the home. As interest rates rise, home affordability becomes less attractive and feasible for many potential buyers, and home prices start to fall in an attempt to allow a quicker sale.
THE MAKING OF ANOTHER US/GLOBAL HOUSING CRISIS
The easiest way to think about this is to consider the ability of buyers to secure and satisfy mortgage payments for homes. The more expensive the sales price of the home and the interest rate of the loan is, the more likely the affordability of the home is going to be perceived as undesirable.
This article originally appeared at TheTechnicalTraders.com.