“Only a small share of buyers will scrap their plans to buy a home if rates surpass 5 percent. This reflects their determination to be a part of the housing market,” said Marr, senior economist at Redfin.
Housing Affordability Hits 10-Year Low
Additionally, the rising home prices in conjunction with rising rates appear to have limited impact on buyers. According to the NAHB/Wells Fargo Housing Opportunity Index (HOI), the rise of home prices and interest rates pulled down housing affordability to a 10-year low in the second quarter of 2018.
Related: Richmond Fed President Says Rates Must Keep Rising
57.1 percent of new and existing homes sold between at the beginning of April and through the end of June were affordable to families earning a U.S. median income of $71,900. This represents a decrease from the 61.6% of homes sold in the first quarter that were affordable to median-income earners, which registered its lowest reading since mid-2008.
Additionally, the national median home price jumped from $252,000 in the first quarter of 2018 to $265,000 in the second quarter — the highest quarterly median price in the history of the HOI series.
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