How do people afford homes with this high mortgage rate?

Question

Yes, the mortgage rate has gone up, real estate sales slows down. But I still see the homes that I favorite in the past few weeks went on pending. Those home price average from $500-$700k. We live in PNW, and I know there are lots of high tech people here that make high income, maybe all of these buyers are just making lots of money? I do not see how a regular family can afford mortgage like 4-5k/month(include taxes)? Unless you are really paying 50% of your income towards your mortgage. Perhaps people just sold their old home and get themselves another home?

Joel Case · Answer

For me buying down the rate as much as possible was a key component of making it affordable for me.

Arsen Atanasovski · Answer

In 2008 we had the RE crash, now people that our buying have an “inflated paycheck” I’ve seen people I know personally move 1-2 jobs in 6 months and jumped their pay 20% per move. Once supply runs out jobs will be laid off. Where I live people seem or they just want to think everything is all good, when I ask the question they stare at me like I’m the devil, example most of my friends and family work for the car companies I ask them the simple question. Your dealerships have no cars for sale how long will this last until the money runs out? And then your job runs out? The way they get paid is selling cars if you don’t have the product that generates your income how long will that pay last? My opinion there will be a job crash soon and then all the people that bought their over priced RE will be in trouble. My thoughts.

Chris Seveney · Answer

@Angela Venger

Real estate is the long game. In 2008 I had to sell my primary at a loss and had no other assets and after saving $, building both sweat equity and appreciation, our real estate portfolio is well into 7 figures.

Also our incomes have grown significantly during that time as well and our expenses have gone down as things I wanted in my 30’s I don’t care about in my 40’s

Jonathan R McLaughlin · Answer

@Angela Venger that’s part of it (the equity)but remember 1) people are being squeezed on rents and rates are expected to go higher so why not buy? 2) the job market is excellent and people have gotten a lot of extra cash 3) inflation has hit salaries as well as housing prices. 4) Rates are still low by historical standards. 5) the people making food money are REALLY making good money—a real have and have not situation

Brian Cassanego · Answer

I’m in San Francisco and I’m completing a loan for a couple on a 2.8M condo at 75% LTV. Talk about a high mortgage payment. But they make enough money so they will be fine.

Jason V. · Answer

All cash offers... Or very high down payments...

Or more likely, the prices will have to drop to affordable prices with these interest rates. The Fed is *intending* to crash the market. That's exactly WHY they would raise the interest rates like they have and why they'll continue raising them for the foreseeable future.

Ricardo Hidalgo · Answer

10-15% typically for second or perhaps up to 20% LTV depending on the property.

Sean T. · Answer

I just saw a development the other day, 70 SFRs at $6.5M each. The reality is that many have sold their current properties, have fam support, etc etc.

I do think the lower end markets will see prices fall like crazy but money always finds money.

How do people afford homes with this high mortgage rate?

How do people afford homes with this high mortgage rate?

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