Homebuyer Budgets Post Slowest Annual Growth Rate Since 2020

Homebuyer budgets rose by just 0.3% year-over-year in the three months ending April 30, the slowest growth rate since June 2020, Redfin reports. As mortgage rates soar to new highs, buyers are reserving a larger portion of their budgets for interest payments, leaving little wiggle room for inflated home purchases.

Declining budgets are indicative of a cooling market, especially as sellers respond to a drop in buyer demand. Roughly 21% of all home sellers lowered their asking prices in the last four weeks, a 10% year-over-year gain.

With a 5.2% interest rate, a buyer on a $2,500 monthly budget can afford a home priced at $427,250. When rates were 3%, a buyer on the same budget could afford a $517,500 home.

“When mortgage rates go up, buyers’ budgets go down,” said Redfin Deputy Chief Economist Taylor Marr. “And when buyers’ budgets go down, sellers have to meet buyers where they are. Budgets haven’t fallen from a year ago and we don’t expect home-sale prices to fall, either. But the fact that budget growth has slowed so significantly is one sign among many that home-price growth will continue to slow as the year goes on.”

Read more