Assuming you purchase a home for $422,000, put down a conventional 20%, and your mortgage rate is about 6.5%, that means you’d end up spending nearly $2,500 on your monthly mortgage payment. That would be well over one-third of a monthly gross salary, which is generally discouraged. Most real estate experts warn against spending more than one-third of your salary on housing.
But assuming a $148,000 salary, that $2,500 payment wouldn’t feel as overbearing—that is, if you have the ability to shell out on the down payment and can even find a home that meets your needs within that median price range.
While much of the housing-market conversation has been focused on mortgage rates—which continue to hover in the mid-6% range—a sticky problem is home prices remain historically high.
“It’s really the home prices that are the bigger hurdle,” Michelle Griffith, a luxury real-estate broker with Douglas Elliman in New York City, told Fortune. “Even if mortgage rates dropped to zero, the reality is that buying into the market … still requires a significant amount of cash upfront. Inventory is tight, and competition is high, so the cost of the property itself is what keeps most buyers on the sidelines.”
Still, mortgage rates are a barrier for some buyers—especially those who recall the sub-3% mortgage rates of the pandemic era. It’s also the reason many current homeowners are staying in place and refusing to sell.
“The bottom line is that there is downward pressure on home prices coming from falling demand and rising supply,” Sløk wrote.
While not by much, mortgage rates are also trending slightly lower during the past few months, and home-price growth is mostly flat or slightly declining.
