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How Many Households Are Priced Out by Rising Mortgage Rates?

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How Many Households Are Priced Out by Rising Mortgage Rates?

Soaring interest rates are pricing a growing number of Americans out of the new-home market, and that share is expected to keep rising as the Fed sends borrowing costs even higher

March 20, 2023
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Image: Hairem / stock.adobe.com

The National Association of Home Builders' latest 2023 Priced-Out Estimates reveal that 96.5 million households are not able to afford a median priced new home amid higher interest rates, and a gain of just $1,000 could price out an additional 140,436 households.

For a new home with an estimated median price of $425,786 and a modeled 30-year fixed mortgage rate of 6.25%, a quarter percentage point rate increase would price out approximately 1.3 million households. According to NAHB Eye on Housing, that scenario is becoming increasingly common as the Federal Reserve continues to target the housing market in its fight to cool inflation.

When interest rates increase from 6.25% to 6.5%, approximately 1.28 million households can no longer afford buying a median-priced new home. An increase from 6.5% to 7% prices approximately 1.29 million more households out of the market. And, about 917,000 households would further be squeezed out of the market if interest rates increase to 7.25% from 7%. 

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