Any increase in interest rates, tightening of lending standards or slowing of the economy will all push buyers back to sustainable debt coverage (30% PITI ratio of income).
With median household income at ~$59,000, that’ll make max sustainable PITI coverage of $17,800/yr for a median household.
PITI coverage at current rates (6.25%) pushes home prices to $240K. If rates go to 8%, it pushes it to $200K.
Both are 50-60% below today.
Assuming people don’t have 20% down and use 80-10-10 financing. It pushes it to $210K at current rates and $180,000 at 8%. I used a 2% premium for the second mortgage.
