You know that interest rates are going up but I am not sure everyone realizes how this is crushing the real estate market.
10Y T-Bond (US Government) is now close to 4% while a 30Y mortgage is getting close to 7%. This is more than double what it was a year ago!
But what does that mean?
Well let's take this example for someone looking for a house in San Diego, California. This couple has a budget of $3,000/month for a potential mortgage
- A yer ago: This person could have purchased a 1,373-square-foot home
- Today? With the same budget he could only get a 931 square foot home.
Downsizing by 30%+! This is important!
Of course, this means that today, buyers are going to be people either selling their current house (and having cash then) or people who already have large cash amounts in the bank.
This is not going to help out the economy as housing is the biggest component in most developped market.
Sales have already started to decline as well as average price.
Existing-home sales have dropped for seven months in a row through August. Home prices are still rising on a year-over-year basis, but the pace of growth has slowed, and prices are starting to decline month over month.
Posted Using LeoFinance Beta