Monthly Mortgage Payments’ Worth is Shrinking Due to Interest

Due to the fact that mortgage rates doubled in the last year, a monthly mortgage payment of $3,000 now buys less than ever before. Not only are buyers only able to afford a home of $560,000 (instead of $865,000 as it was in January 2022) based on current interest rates, but it also means they are losing space to the tune of about 140 square feet. 

But according to Zillow, as mortgage rates have backed off recently, the typical home value associated with a $3,000 mortgage payment is up about $60,000 since October and home size has recovered by 84 square feet. 

“Mortgage rates have a huge impact on the types of homes buyers are able to afford. Rates that doubled over the past year carved an extra bedroom or office space off of homes at the national level, though the sting has lessened in recent weeks,” said Anushna Prakash, Economic Data Analyst at Zillow. “Buyers in more affordable hot markets are still getting solid bang for their buck, despite losing a lot of purchasing power.” 

The annual decline is more pronounced in some metropolitan markets. Hartford, Connecticut saw the largest drop in what $3,000 per month can buy in 2022, losing 1,200 square feet. Buyers in Indianapolis and Cleveland both lost out on more than 1,000 square feet in the last year. Cleveland and Kansas City are among the top 10 metros for home size at this price point and are among Zillow’s 10 hottest markets for 2023. 

On the other hand, $3,000 per month has always gotten a buyer less space in pricey markets, but their floor plans are shrinking all the same. In San Jose it will buy a 1,052-square-foot home, down from 1,268 square feet last year. Los Angeles, San Diego and San Francisco are close behind, with square footage for each below 1,400 square feet. 

Click here to see Zillow’s research. 

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