As Housing Costs Reach New Highs in a Market Correction, Buyers Brace for the Worst

Mortgage rates are at their highest level since 2002, and elevated borrowing costs paired with record high home prices are diminishing housing affordability across the country. The typical October homebuyer with a home value equal to the national median asking price of $425,000 and a 10 percent down payment paid 77 percent more on their loan than they would have last year, amounting to an additional $1,117 every month, The New York Times reports.

As Americans adjust their budgets and grapple with even higher housing costs in Q3 2022, a number of would-be buyers are opting to postpone their home purchasing plans, though a market correction could force sellers to make concessions and lead to substantial price drops in a number of overheated regions.

Most analysts don’t expect home prices to free fall as they did after the subprime mortgage crisis in 2008, in part because of stricter underwriting practices, a big bump in home price appreciation and a class of all-cash investors waiting to swoop in when prices dip. But the cuts are coming, analysts said, perhaps as deep as 20 to 30 percent in markets that saw the most appreciation, particularly in the Mountain West region and the South. Still, most homeowners will have gained some equity over the past two years, even after a slide in home values.

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