Home Insurance Mortgage rates hit 23-year high, sinking Cincinnati housing demand

Mortgage rates hit 23-year high, sinking Cincinnati housing demand

by Joshua Garcia

Buying a home in the Cincinnati metro area has become more costly than it has been in at least a decade, with prices hovering near record highs and mortgage rates reaching their highest levels in 23 years. The average 30-year fixed-rate mortgage recently reached 7.31%, the highest rate since December 2000, according to Freddie Mac.

Meanwhile, home prices in the Cincinnati metro area continue to rise steadily, having increased by 10% to $285,000 in August compared to the same month last year. Redfin, a national real estate brokerage, reported that the median home price reached a record high of $290,000 in May.

Based on these figures, the monthly payment on a median-priced home in Cincinnati would be approximately $1,956 with a 20% down payment on a 30-year fixed-rate loan. This calculation does not include taxes, insurance, and other expenses. The Enquirer estimates that this is the highest mortgage payment for the Cincinnati area since at least 2012, when Redfin started tracking data for the region.

To comfortably afford such a payment without exceeding 28% of your monthly gross income, which is the threshold often used by mortgage lenders to qualify borrowers, your household would need to earn at least $7,000 a month or $84,000 a year. However, the latest US Census data shows that the median household income in the Cincinnati metro area is $75,062, which pushes the boundaries of affordability too high for some potential homebuyers and sidelines them.

As a result, pending home sales in the Cincinnati area have declined by 23% from July to August this year, according to Redfin. Many buyers are frustrated because what they could afford a few months ago, such as a $400,000 house, is now out of their reach, and they can only afford a house closer to $300,000.

The situation is expected to worsen if the Federal Reserve continues to keep interest rates high. The central bank has indicated that it might even raise its benchmark rate once more before the year ends. This would further exacerbate an already unaffordable housing market.

Additionally, the resumption of federal student loan payments for about 40 million borrowers adds another financial burden for many consumers in their prime homebuying years. This combination of factors makes it increasingly challenging for individuals and families to enter the housing market in the Cincinnati metro area.

In conclusion, the Cincinnati metro area is experiencing a surge in home prices and mortgage rates, making it more expensive to buy a home in the region than it has been in at least a decade. Affordability is becoming a major issue, with the rising cost of housing and stagnant incomes pushing many potential buyers to the sidelines. The future looks uncertain, with the potential for further interest rate hikes and the resumption of student loan payments adding to the challenges faced by homebuyers in the area.

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