It’s a story you’ve probably read or heard too many times to count over the past year: home building materials are expensive and hard to find, labor is scarce, and prices for houses are very high, but as mortgage rates are low, the demand for housing is higher than ever.
Now, rising mortgage rates are making the housing market even less affordable.
Median home prices in the Baton Rouge area jumped to $239,000 in 2021 from $220,000 in 2020.
In general, higher new construction prices are the result of pandemic-caused supply shortages, such as lumber, coupled with inflation. Appliances as a whole have risen 25% in price between 2019 and 2022, Tom Cook, an appraiser at Cook, Moore, Davenport and Associates, said at the recent TRENDS seminar sponsored by the Greater Baton Rouge Association of Realtors.
But the biggest threat now appears to be rising mortgage rates. In 2020 and 2021, the rates remained between 3% and 4%. Now they are hovering around 5.5%, and a jump to 6% would have serious consequences for potential buyers.
When rates were around 3% to 4%, a potential buyer in Baton Rouge only needed to earn about $45,000 a year to qualify for a $300,000 30-year mortgage, Cook says.
To qualify for that same 6% mortgage, a buyer would need to earn about $62,000 per year.
“It’s a pretty dramatic difference,” Cook said.
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