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High-priced home builders to lose buyers

Guest perspective: Rising interest rates could price out 61% of this market

The ROI Producing Real Estate Event of the Summer
Reach top decision-makers at Inman Connect

The economy continues to expand, so builders are now wondering if the Fed will raise rates, causing mortgage rates to rise. Interestingly, we conducted a sensitivity analysis and found that builders of higher-priced homes are far more vulnerable to rising rates than entry-level builders. While entry-level buyers are highly impacted by mortgage-rate changes, we found that high-priced home builders are even more exposed to mortgage-rate risk right now. We analyzed how a mortgage-rate increase from 5 percent to 9 percent would affect the number of households that would qualify for a $250,000 home as opposed to a $750,000 home. Here are our findings: $250,000 Homes – Most of the United States' 110 million households (60 million or 54 percent of total households) can qualify for a home priced at $250,000, assuming a 5 percent mortgage rate and 20 percent down payment. If rates rose to 9 percent, almost 22 million households (36 percent of those who originally qualified) would be "...