Following the NAHB’s 2021 “Priced Our Estimates” released earlier this month, new analysis shows that 1.3 million households would be priced out of the market for a nationwide median-priced home, currently $346,757, if interest rates rose by a quarter-point from 2.75% to 3%.
This matches the rise in interest rates observed in 2021 so far, from 2.73% at the end of January to slightly above 3% now.
The study found that at considerably higher rates, the number of priced-out households tapers. For example, when mortgage interest rates increase from 5.25% to 5.5%, 1.1 million households are priced out of the market for a median-priced home. This diminishing effect happens because only a declining number households at the higher end of household income distribution will be affected. When interest rates are relatively low, a 25 basis-point increase would affect a larger number of households at the lower and more populous part of income distribution.
