Why lower home prices aren’t bringing buyers back to the housing market

A lower home price doesn’t necessarily mean a more affordable home. Consider a buyer looking at a $450,000 home when the average 30-year fixed mortgage rate was 5.98% in February. With 20% down, the monthly principal and interest payment would be approximately $2,154. Now imagine that buyer finds a home priced at $395,000, but mortgage rates have climbed to 7.40%. The monthly payment increases to approximately $2,188. The home costs $55,000 less, yet the buyer would pay about $34 more each month, excluding taxes and insurance. That disconnect helps explain why lower-priced housing markets aren’t necessarily experiencing stronger demand. Even substantial price reductions may offer little relief when higher financing costs offset the savings. As HousingWire Lead Analyst Logan Mohtashami has discussed in this week’s Housing Market Tracker, mortgage rates near 7% remain a significant headwind for housing demand. The pressure extends beyond expensive coastal cities and markets that experienced the most dramatic price increases. HousingWire Data shows weakening contract activity in Omaha, Nebraska; Huntsville, Alabama; and Tulsa, Oklahoma, where median asking prices remain below $400,000...