ResiClub co-founder and editor-in-chief Lance Lambert talks about the US housing affordability crisis on “Making Money.”
The cost of buying a new home has reached a new record, even as mortgage rates have fallen from five-month highs, according to a new report.
Investigation result Redfin In the four weeks ending May 19, the median U.S. home sales price soared to $387,600, up 4% from a year ago. The monthly mortgage payment at that price is now $2,854, taking into account the median 30-year mortgage rate of 7.02%. This is about $20 below the April record, due to a slight decline in mortgage rates.
“Rising mortgage rates and skyrocketing home prices are putting some buyers off purchasing this spring,” said Lisa Sturtevant, chief economist at Bright MLS. “First-time homebuyers are suffering the most.”
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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.
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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 Nouvérage/Bloomberg via Getty Images/Getty Images)
“Buyers looking to trade up are stuck because they’re ready to buy their next home, but with interest rates as high as they are today, it doesn’t make financial sense to sell,” said Sam Brinton, an agent with Redfin Premier in Utah.
Mortgage buyer Freddie Mac said Thursday that the average interest rate on a 30-year loan fell slightly this week to 6.94%, down from a fall peak of 7.79% but still significantly higher than 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.
