It is tough for any market to withstand a 56% cost increase in a single year. That’s not a 56% jump in prices. It is a 56% pop in the cost to the buyer.
That’s what has happened in the past year in the U.S. housing market. Mortgage rates have more than doubled, increasing the monthly cost of borrowing money to buy an average-priced American home by 56%. That saps the purchasing power of borrowed money, yet it has not reversed the pandemic price gains.
Home prices have continued climbing even as mortgage interest rates have hit 20-year highs. Yes, price increases are slowing, but they have shown to be resilient so far to the higher borrowing costs faced by buyers. The number of existing homes sold in September fell by 24% compared to a year earlier while the median price increased by more than 8%.
