You may have already become aware that the 30 year mortgage rate has surpassed 7%. You may believe that the home price should come down hard soon as the home affordability has been at the lowest level in the past 30 years. If you are really one of them thinking about that, unfortunately you will be disappointed to learn that you are wrong! Why so?
By looking at the percentage share of outstanding mortgages as a function of their respective interest rates, you may understand better why you should not expect a meaningful home price drop. What you’ll see is that 91% of borrowers have mortgages less than 5%. More importantly, a full 70% of outstanding mortgages carry rates less than 4%.
In other words, none of those sub-4% homeowners will be selling in today’s market except by necessity. And that means don’t expect home prices to drop…
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