OAKLAND, CA. – Mortgage applications are down 40% from a year ago, with some rates approaching or reaching 5% and sure to climb.
House prices have risen dramatically, as have interest rates. But what many don’t know is that the common mortgage payment for Californians is 60% higher than in March 2021.
In March of last year, a house bought for $607,000 now costs $759,000. Assuming there was a 20% down payment, there would have been an interest rate of 2.74% versus nearly 5% now.
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A year ago, the monthly payment on that same house would have been $1,997 versus $3,260. That’s a difference of $1,263 each month, not including insurance and property taxes sometimes added to the monthly payment.
Few, if any, revenues have grown as much in the past year.
“More people are being taken out of the housing market because it takes a lot more money to qualify for the home they are considering,” said East Bay real estate agent Sam Benson.
Debt that people already have is often deducted from their income.
“It’s so important that people pay off their revolving and installment debt when buying a home,” Benson said.
Add to that a bare-knuckle competition for the few houses available. This often results in overbidding that prevents some buyers from qualifying for an even larger loan.
“Our advice, often, is to look at a lower price than they thought they could afford. And so maybe they don’t quite have the house they wanted to buy, but they can come in on market and move from there,” said Kathee Shatter, senior real estate agent for Compass Real Estate.