Higher Interest Rates Will Eliminate Many Would be Home Buyers from the Marketplace

The National Association of Home Builders (NAHB) 2021 Priced-Out-Estimates reports that 75.1 million U.S. households are unable to afford a median priced new home and that an additional ~154,000 would be priced out if the price of a home were to go up by $1,000. The NAHB 2021 priced-out estimates also detailed how interest rates affect the number of households that would be priced out of the new home market. For a new home with an estimated median price of $346,757 in 2021 and the recent 30-year fixed-rate mortgage rate of 3%, a quarter percentage point increase in the interest rate would price out approximately 1.3 million households. The monthly mortgage payments will increase as a result of rising mortgage interest rates, and therefore higher household income thresholds would be needed to qualify for a mortgage loan.