Philadelphia Home Buyers Struggling with Rising Mortgage Rates and Home Prices

The pent-up demand for housing in Philadelphia is being hindered by low inventory, escalating home prices, and skyrocketing mortgage rates. Many new homebuyers are finding housing increasingly unaffordable.

According to [Company Name], a home buying company based in the Philadelphia metro area, mortgage rates have surged significantly over the past six months. While there have been rate hikes before, nothing has been as extreme as what’s happening now. This issue of housing affordability is affecting virtually every major city across the country, leaving many would-be homebuyers in Philadelphia unable to afford a home and pushing them back into the rental market.

What Are Mortgage Interest Rates Right Now?

As of early April 2022, the average rate for a 30-year fixed mortgage is 5.10%, according to Bankrate.com. For a 15-year fixed mortgage, the average rate is 4.22%. A jumbo mortgage, which is a larger loan for properties priced at $500,000 or more, currently has an average rate of 5.03%.

Why Are Mortgage Rates Rising?

The Federal Reserve raised its benchmark interest rate for the first time since 2018 as part of its effort to curb inflation. The Federal Reserve has signaled that additional rate hikes are likely later in 2022.

The sharp increase in mortgage rates is occurring alongside two other factors that are pricing many first-time homebuyers in Philadelphia out of the market. These factors include a low inventory of homes for sale and significant increases in home prices. Together, these elements have made home buying a more challenging and expensive process. Even professional home buyers companies in Philadelphia are facing fewer and fewer opportunities.

How Are Higher Mortgage Interest Rates Affecting Monthly Mortgage Payments?

There are two main consequences when mortgage interest rates rise. First, higher rates result in higher monthly mortgage payments. Second, higher rates limit the amount a homebuyer can borrow due to lender guidelines that restrict the portion of income allocated to housing costs. Below are two simple examples of how monthly mortgage payments increase with a 2% rise in the interest rate:

• For a $300,000 home with a 10% down payment and a 4% mortgage rate over 30 years, the monthly principal and interest payment would be $1,289. If the rate increases to 6%, the monthly payment rises to $1,618, an increase of $329 each month.
  
  

• For a $400,000 home with a 10% down payment and a 4% mortgage rate over 30 years, the monthly principal and interest payment would be $1,718. If the rate rises to 6%, the monthly payment increases to $2,158, an increase of $440 per month.
  
  

Is There An Affordability Crisis In Philadelphia Housing?

Yes. As both housing prices and the cost of borrowing money rise, fewer people can afford to buy homes. Additionally, the nation's homebuilders have struggled to meet the demand for housing, which means it could take years—possibly a decade or more—for supply to catch up. As a result, many first-time homebuyers in Philadelphia will remain renters for longer, and some may never be able to purchase a home.

[Company Name] will continue purchasing all types of residential properties, repairing and upgrading them to meet current standards, and doing its part to help maintain the housing supply in Philadelphia.