The NAHB conducted an analysis to determine how many households were priced out by rapidly rising mortgage rates over the duration of 2022. At the beginning of 2022, assuming a median purchase price of $450,700, approximately 34% of buyers could afford to purchase a home with a 3.22% 30-year fixed-rate mortgage. However, as mortgage rates continued to rise during 2022, approximately 18 million households were priced out over the course of the calendar year.
Mortgage payments have increased from $1,925 on a median priced new home in early 2022 to $2,923 on the same house, a 51% increase. Higher mortgage rates have worsened housing affordability as home prices remain high in 2022.
When interest rates increased from 3.22% to 4.22% as of the middle of March 2022, the percent of households that can afford median-priced new homes decreased to 30.4% from 34.2%. The monthly mortgage payment, which includes principal and interest, but excludes taxes and insurance, for the same home increased to $2,165 from $1,925. Consequently, an additional $10,000 of household income is needed to qualify for a similarly sized mortgage loan. Approximately 5 million households were able to qualify for a mortgage to purchase a new home at the beginning of 2022, before mortgage rates increased, but not afterwards in March.
An increase from 4.22% to 5.22% as of early May 2022 priced additional 5 million households out of the market for the median-priced new homes. When mortgage rates jumped to 7.08% in late October, only 20.3% of households could afford a median priced new home. The monthly mortgage payment rose to $2,923, which requires at least $147,071 household income to qualify for a mortgage for the same home.