ResiClub co-founder and editor-in-chief Lance Lambert talks about the US housing affordability crisis on “Making Money.”
New data shows the cost of buying a new home has hit another all-time high.
The median U.S. home sale price jumped to $397,954 in June, up about 5% from a year ago, the highest level on record and the biggest annual increase since March, according to Redfin research.
The monthly mortgage payment at this price would currently be $2,749, taking into account the average interest rate for a 30-year mortgage of 6.86%. This is about $88 lower than recorded in April, due to a slight decline in mortgage rates.
“High mortgage rates and record high home prices have made affordability the biggest challenge facing the housing market in 2024,” said Lisa Sturtevant, chief economist at Bright MLS. “While there is more inventory on the market, more buyers are being priced out of their homes in markets across the U.S. Some buyers plan to wait for interest rates to fall later in the year, which could mean a relatively slow summer for home sales.”
Mortgage calculator: See how much rising interest rates will cost you
Homes for sale in Huntington, NY on August 5, 2020. (Photo by Thomas A. Ferrara/Newsday RM via Getty Images/Getty Images)
There are a variety of driving forces behind the rise in house prices.
Years of under-construction created a nationwide housing shortage, then soaring mortgage rates and rising costs of construction materials made the problem worse.
Rising mortgage rates over the past three years are also creating a “golden handcuff” effect on the housing market: Sellers who locked in record-low mortgage rates of 3% or less at the start of the pandemic are becoming reluctant to sell, further restricting supply and leaving eager would-be buyers with few options.
Why can’t I find any homes for sale?
Economists predict mortgage rates will remain high for most of 2024, then Federal Reserve Still, interest rates are unlikely to return to the lows seen during the pandemic, and investors expect only one or two rate cuts this year.
A sign outside a home for sale in Atlanta on Sept. 6, 2023. (Photographer: Elijah Nouvellege/Bloomberg via Getty Images/Getty Images)
Mortgage buyer Freddie Mac said Thursday that the average interest rate on a 30-year loan rose slightly this week to 6.95%, down from a fall peak of 7.79% but still well above the pandemic-era low of just 3%.
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The supply of homes available for sale remains an astonishing 34.3% down from normal levels before the COVID-19 pandemic began in early 2020, according to a separate report from Realtor.com.
A majority of homeowners say they would be nearly twice as willing to sell their home if their mortgage interest rate was 5 percent or higher, according to a Zillow survey. Currently, about 80 percent of mortgage holders have interest rates below 5 percent.
