Millions of homebuyers in America have been priced out since the start of the year — economists say it's likely to get worse

According to a leading property economist, rising US interest rates have priced more than 9 million Americans out of the housing market since the beginning of the year.

More than 3 million people have been priced out of buying a home since January, with the average monthly price of paying off a home in the US rising by nearly $270.

'It's pretty demoralizing'

Six more rate hikes are expected by the end of the year, as the US Fed has increased interest rates twice this year. The 30-year fixed-rate averaged 4.7% after beginning the year at 3%, and that has already led to a big jump in mortgage costs.

As house prices rose more quickly than incomes, affordability fell. Cash transactions and purchases by investment groups jumped, as more people were buying second homes with their increased equity.

In California, the monthly cost of paying off the median mortgage is more than $500 higher than in January, with fewer than 30% of first-time buyers in the state able to buy a home.

22% of buyers across the US are investors, compared with 15% a year ago, while 27% of purchases are all-cash, according to the NAR. The share of purchases by first-time buyers fell last year.

As more people compete for that smaller pool of homes, prices will go up.

Ben Wick of Insider said that Americans are not likely to lose their homes if the real estate bubble burst.

Many people are frustrated with the situation.

Actuarial accountant Rachel Linehan and her partner Dan have been trying to buy a home in Massachusetts for the last four months. She said that the market of rising rates had shrunk their budget by up to $100,000, limiting the range of available homes in their preferred area.

Linehan remembers waiting in a line at an open house viewing. She thought she and her partner had a good chance of buying a home with a good salary, no debt, and no kids.

It is pretty demoralizing. We went in feeling pretty hopeful but that hope has waned over time to the point where we are feeling pretty small.

Low supply means prices aren't likely to fall soon

There are 850,000 homes for sale in January, which is the worst on record, and a falling margin of affordability.

She said the availability of homes for middle-class buyers has fallen since the beginning of the epidemic, with one affordable listing for every 125 households now compared to one for every 45 households in 2019.

Jonathan is competing with up to 40 other buyers to purchase a home in Atlanta.

Buyers were willing to pay the appraisal gap, which is the difference between the bank's valuation of a home and the price under offer, which was locking Tatum out.

If I see a $550,000 home, even though I can afford the mortgage and the monthly payment, there is no way I could afford a $75,000 payment and a $50,000 appraisal gap.

The growing trend of rent-back agreements, where sellers demand to live in their home after sale until they find a new property, made most offers non-starter, he said.

'Waiting is only going to make it worse'

Since graduating from college, the prices have risen and Tatum sees no other option than to continue to try and buy.

He said that he didn't see people wanting to not own a home. If you don't want to rent anymore, then you probably want a home.

Waiting is going to make it worse.

It is a sentiment echoed by Evangelou, with the NAR forecasting sustained price rises, though at a slower rate of between 4% and 6% this year.

If you are in a position to buy a home, just do it. "Because don't expect mortgage rates to come down," he said.

The only way to accommodate a growing market of priced-out Americans is to build more houses in the US, according to economists at the NAR. Growing numbers will continue to fight for homes.