How much more pain can homebuyers take?

Jan. 25, 2022 – San Diego, CA – Apparently, San Diego home buyers can withstand much more pain than we all thought was possible.

At the peak of the housing bubble in 2006, the median home price was $230,300, and 30 year fixed rates were at 6.76%. With 20% down the monthly payment was $1,196. The median household income was $4,071 at the time, so housing accounted for 29.8% of household income.

Let’s apply the same calculation to today to see where buyers stand in comparison.

The national median home price is up 53% to 353,900, but household income is also way up – 40% to $5,627.

Using 3.65% (the average rate reported by MortgageNewsDaily.com) as the current 30-year rate, and assuming the same 20% down, the monthly payment comes out to $1,295.

That’s only 23% of median household income, well below the average of 28%.

If that 28% holds true, homebuyers could stomach interest rates up 5.25% before stretching past the affordability comfort zone.

If interest rates keep increasing but hold at 4%; in that scenario, homebuyers could still stomach another 16.5% in home appreciation before surpassing the historical affordability average.

In San Diego numbers, that 16.5% equates to a median price of $891,671 (up from $765,000 today).

Eye-opening data to say the least.

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Brian Daly

Brian has been in the real estate space since 2005 and specifically in the investment real estate world since 2011. He's the founder of The San Diego Home Buyer (residential iBuyer), Alchemy Renovations (residential construction), Team Sage (residential real estate sales), and publisher of Real Report (weekly real estate market update).