Riverside County Bankruptcy Lawyer Blog
Over the past three years, a series of impactful events have significantly influenced the housing market. In response to the economic challenges posed by the COVID-19 pandemic, the Federal Reserve injected unprecedented amounts of money into circulation. This infusion of funds gave more individuals cash in hand to make down payments on homes.
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Simultaneously, the widespread adoption of WFH (work from home or remote work) reshaped living preferences, prompting a shift from urban to suburban and rural areas. People realized that if they didn’t need to consider commuting, they saw their relationship with work differently and could make lifestyle choices accordingly. Those who made a home purchase in 2020 or 2021 likely secured favorable fixed-interest rates, while those with adjustable rates may find themselves facing financial challenges. With interest rates at historic lows during the 2020-2021 period, the National Association of Realtors (NAR) highlighted in a report that the qualifying income for a median-priced home in America was approximately $50,000. Fast forward to 2023, and this figure has surged to around $107,000. This means that prospective homebuyers, who would have met the criteria for a home loan just a few years ago, now need significantly higher incomes to afford a similar property. This makes the number of possible home buyers shrink immensely over just a few years, not because they don’t want to buy a home but because they are no longer able to qualify for the mortgages. There are even stories floating around online that people who no longer qualify for the mortgage they already have, are being forced to refinance under the new interest rates simply because they no longer qualify based on the current conditions. That means theoretically people who had a 3.5% fixed mortgage could be forced into a 7.5% mortgage simply because they don’t make enough money after inflation. America has a habit of charging people more money when they can’t afford their current situation.