Two years ago, 3% mortgage rates made buying a home as cheap as it had been for years. However, the flood of people who wanted a home and the Fed’s rate increase quickly took away the math that made home buying a real deal. Recently, that math got even worse. Mortgage rates have surged to 7% again. And, home inventory has shrunken.

Dave Liniger, chairman of real estate broker RE/MAX told CNN, “We’re just going to have to learn to live with 6.5% or 7% mortgage rates for six to 18 months.” Combine that with a shrinking inventory. (These are America’s modern ghost towns.)

According to Realtor.com, in June, home listing for existing homes was 614,000. In February 2020, the month before the COVID-19 pandemic hit, the number was 928,000. One reason inventory is tight is that people who got 3% mortgages in recent years do not want to give up such a substantial monthly payment advantage. If these people move to another home, their mortgage rates will double.

The National Association of Home Builders did the calculation. The mortgage payment for a home priced at $450,700 was $1,970 in January 2022. By October, that number rose to $2,923. That increase pulls thousands, if not tens of thousands, out of the universe of home buyers. The median income to buy a home at this price was $104,000, with a 3.22% mortgage rate, according to the NAHB. That figure rose to $147,000 with a mortgage rate of 7.08%

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A drop in home buyers may eventually bring prices down. People who want to list their homes want to see the value of those homes as high as possible so that they will get a good price if they get an offer. In the meantime, under current conditions, many people who want a home will have to find one less expensive than they might have two years ago, or they will need to keep the homes they have or rent. (These are the cheapest cities to buy a home.)

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