The US Housing Market is BREAKING (few are ready)

So what does a high mortgage rate actually do to a buyer? It changes the price of a house without actually changing the price of the house.

Almost nobody buys a home outright.

They buy a monthly payment and the rate sets that payment.

Picture a couple looking at the typical American home, priced at around $430,000.

They've saved a 20% down payment, so they're borrowing roughly $343,000 over 30 years.

When they first ran the numbers, rates were about a full point lower than they are now.

At 6.4%, principal and interest came to roughly $2,150 per month.

Tight, but doable.

That number went into their heads and their entire budget got built around it.

But then, rates kept climbing.

As I make this video, the average 30-year fixed rate from Freddie Mac, which tracks mortgage rates every single week, sits at 7.4%.

That's after 7 straight weekly increases.

At that rate, the same house, the same loan, costs about $2,380 per month.

That's 230 bucks more every single month or about $2,760 per year for a house that hasn't changed at all.

For context, at the 2021 record low of 2.65%, that same loan would cost about $1,380 per month.

That's nearly $1,000 per month on the very same house.

So technically, the couple doesn't walk away because the house got more expensive.

The deal breaks down because the payment did.

And now let's scale this up.

According to the National Association of Realtors or NAR, every one point drop in rates adds about 5.5 million households that can qualify to buy, including 1.6 million renters.

A rise presumably works much the same way in reverse.

So a move like this doesn't push out one couple, it pushes out millions.

Over a number none of them get to negotiate.