US Housing Prices Expected to Fall 5% Due to Interest Rate Shock

Mortgage Rates Break 6% Threshold, Reducing Purchasing Power
Homebuyers Must Spend 25% of Annual Income on Interest for Median-Priced Homes

[Image source=AP Yonhap News]

[Asia Economy Reporter Kim Hyunjung] Due to the impact of the U.S.'s aggressive tightening measures to combat inflation, housing prices are expected to decline by about 5% annually.

On the 20th (local time), Bloomberg reported that the UK economic consulting firm Capital Economics (CE) forecasted this in a research note released that day. Matthew Pointon, CE's real estate economist, explained, "Real estate prices could fall by 5% annually until mid-next year," adding, "This is due to mortgage interest rates exceeding 6%, which reduces purchasing power."

According to the report, typical households aiming to purchase a home at the median price in the U.S. now have to spend 25% of their annual income on mortgage repayments. This is the highest level since surpassing the mid-2000s average of 24%. The median price of a single-family home in the U.S. reached $428,700 (approximately 554.3 million KRW) as of the first quarter of this year.

Economist Pointon observed, "The rise in mortgage rates will push many potential buyers out of the market," adding, "In such cases, housing competition will decrease, and sellers will eventually have to accept price declines."

Although the Federal Reserve's commitment to raising interest rates to control inflation has been firm and consistent, housing prices have steadily increased until now. According to the real estate market specialized media Mortgage News Daily, the 30-year fixed mortgage rate in the U.S. has risen from below 3.5% at the beginning of this year to 6.03% as of this day.

This content was produced with the assistance of AI translation services.