Many forecasts expect 2023 to be a negative year for housing, but the ultimate direction the market takes will be informed by mortgage costs. In 2022, mortgage rates doubled between the start of the year and late October rising from 3.5% to over 7%. That dramatically increased the effective cost of home ownership for many Americans.
That’s because most buyers finance a house purchase with a mortgage, and so the cost of the mortgage determines the home the buyer can afford. If mortgage costs double, then the house a purchaser can comfortably afford may approximately halve, all else equal.
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