According to a new report, the cost of buying a new house just reached a new high as mortgage rates went up to the highest level this year.
A report from Redfin shows that because of high mortgage rates and expensive home prices, the median monthly housing payment has gone up to a record $2,775 – an 11% increase compared to the same time last year.
“Buying a home is getting more expensive with mortgage rates going up and home prices staying high,” said Ben Ayers, a senior economist at Nationwide. “Even though there’s a strong demand for homes because of demographics and a good job market, many people buying for the first time can’t afford it because of high financing rates and increasing prices.”
Several factors are driving the affordability crisis. First, there’s been a shortage of homes in the country due to years of not building enough. This problem got worse when mortgage rates went up quickly and construction materials became expensive.
Higher mortgage rates in the past three years have made it tough for sellers. Some locked in very low mortgage rates, like 3% or less, during the pandemic and don’t want to sell now. This makes the supply of homes even smaller and gives fewer choices to people wanting to buy.
Economists think mortgage rates will stay high for the first half of 2024. They might start dropping only when the Federal Reserve lowers rates. But even then, rates probably won’t go back to the very low levels we saw during the pandemic.
Also, investors aren’t sure if the Federal Reserve will raise rates this year because of several reports showing higher inflation than expected.
“Some house hunters are hoping to buy now because they’re concerned rates could rise more, and others have grown accustomed to raised rates and pushed down their home-price budget accordingly,” the Redfin report said.
Freddie Mac, which buys mortgages, announced Thursday that the average rate on a 30-year loan this week went over 7% for the first time this year, going up from 6.88% to 7.1%. Although this is lower than the peak of 7.79% in the fall, it’s still much higher than the lows of just 3% during the pandemic.
According to another report from Realtor.com, the supply of available homes is still down by a shocking 34.3% compared to before the COVID-19 pandemic started in early 2020.
A separate survey by Zillow found that most homeowners are much more likely to sell their home if their mortgage rate is 5% or higher. Right now, about 80% of people with mortgages have a rate below 5%.
