One thousand dollars might sound insignificant when compared to the overall price of a new home. But that relatively small amount of money has a surprisingly big impact on affordability.
The National Association of Home Builders economists recently determined that for every $1,000 increase in the cost of today’s median-priced home, nearly 153,000 American households are priced out and would no longer be able to afford it.
Many builders and developers are finding it increasingly difficult to avoid these price jumps in the face of mounting regulations and government-imposed fees, which can add up quickly and shut the door on a growing number of prospective buyers.
Those numbers become even more eye-opening when looking at potential interest rate increases. With just a quarter-point rise in the rate for a 30-year fixed-rate mortgage, approximately 1.2 million people would be priced out of that segment of the market and forced to set their sights lower than a median-priced home—or delay their home purchase altogether.
But the impact varies widely across the country. The effects are more significant in areas where new homes are more affordable.