Buying a house is costlier than anytime in at least the last decade, with property buyers hit with the double whammy of rising mortgage rates and home prices, according to real estate company Redfin.
The average interest rate on a fixed 30-year home loan rose to 7.1%, marking the first time this year rates have topped 7%, according to Freddie Mac. Meanwhile, the median asking price for U.S. home — what homeowners hope their property will sell for — jumped to a record $415,925 for the four weeks ended April 21, Redfin said.
The median U.S. home sale price — what buyers actually paid for a property — also hit a record in April, reaching $383,725, Redfin said, with its data going back to 2015. Sale prices combined with current mortgage rates pushed the median mortgage payment to a record $2,843, up nearly 13% from a year ago, it added.
That may also mean the cost of buying a home is at a historic high, although property buyers in the 1980s dealt with mortgage rates that were significantly higher than today's loans. Mortgage rates reached a peak of 18.6% in October 1981, although home prices were considerably lower, even on an inflation-adjusted basis, than today's values.
The challenges facing homebuyers during the spring home-buying season continue to mount as costs rise. Real estate activity typically increases in the spring, with homeowners listing their properties and buyers attending open houses in the warmer weather and longer days.
It is projected that Americans will purchase 4.46 million existing homes this year, marking a 9% rise from 2023. However, many potential buyers are finding themselves priced out of the market due to high costs, according to economists.
"Elevated mortgage rates and high home prices are causing some buyers to hesitate this spring," noted Bright MLS Chief Economist Lisa Sturtevant via email. "First-time homebuyers are particularly affected."
While buying a home is a key method for U.S. households to build wealth, increasing home prices are making homeownership less attainable for the average American. To afford a typical home comfortably, households now need an income of $106,500— a significant jump from $59,000 just four years ago, as per Zillow research.
The shortage of available properties for sale has contributed to the surge in home prices. Construction has not kept up with housing demand, and many homeowners are reluctant to sell as they secured mortgage rates below 3% during the pandemic.
In light of the increasing cost of homeownership, sellers and buyers are advised by Redfin economic research lead Chen Zhao to approach the current market with adjusted expectations.
According to Zhao, "For those who are able to afford current prices, I recommend that you start looking for your ideal home and understand that this may not be the year to find a bargain deal."
