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USA Real Estate Blog

Each $1K price increase nixes 127K home sales

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WASHINGTON – Jan. 9, 2019 – According to a recent study by the National Association of Home Builders (NAHB), a $1,000 increase in the cost of a median-priced newly built home pushes 127,560 prospective buyers out, meaning that if these people can afford a new home at the current price, they would not be able to if it increased by $1,000.

NAHB calls the numbers “even more startling when looking at the impact of potential interest rate increases. Just a quarter-point rise in the rate for a 30-year fixed-rate mortgage would price out around 1 million households.”

“This study illustrates how even a relatively small increase in price or interest rates can dramatically impact housing affordability,” says NAHB Chairman Randy Noel. “Housing affordability is a serious problem right now in communities across the country. Rising interest rates, regulatory barriers, higher building materials costs and labor shortages all add to the cost of a home, and are preventing households from achieving the goal of homeownership.”

The number of priced-out households varies across both states and metropolitan areas, largely affected by the sizes of local population and the affordability of new homes. The study examined priced-out estimates for every state and over 300 metropolitan areas.

Among all states, Texas had the largest number of homebuyers that would be priced out of the market. The $1,000 price increase would push 11,152 households out of the market in Texas, followed by California (9,897) and Ohio (7,341).

The metropolitan area with the largest priced-out effect in terms of absolute numbers is Chicago-Naperville-Elgin, where 4,499 households would be squeezed out of the market for a new median-priced home if the price increases by $1,000.

© 2018 Florida Realtors®

 

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