Phoenix Housing Less Affordable Thanks to Increased Borrowing Costs

High real estate prices aren’t the only factor knocking potential homebuyers out of the Phoenix housing market. Now there are increasing borrowing costs to worry about. The affordability of Phoenix housing is determined by how much a homeowner pays monthly for their mortgage, taxes and insurance, and as mortgage rates rise, already expensive Phoenix housing grows increasingly unaffordable.

As interest rates increase, an average Phoenix homebuyer has a smaller pool of houses to choose from. Let’s say a homebuyer earns $100,000 yearly and has a $40,000 downpayment saved up. With 30-year mortgage at a fixed rate of 5 percent, the homebuyer can afford a $421,000 home. Once mortgage rates hits 6 percent, that same buyer can only afford a $390,000 Phoenix home, and an increase to 7 percent brings the price down to $362,500.