SEATTLE — Mortgage rates, now hitting 7%, are putting heavy pressure on potential homebuyers.
According to Bankrate Analyst Alex Gailey, it may be time to rent rather than buy.
“A housing shortage, rising home prices, and high mortgage rates are tipping the housing market in favor of renting, at least in the short term, all across the country,” said Gailey.
A new Bankrate study reveals the Seattle metro area ranks third in the nation as the least affordable area to buy versus rent. Only Silicon Valley and the Bay Area are more expensive.
“You see home prices really high in Seattle, well above the national median sale price. In Seattle, the median sale price of a home is roughly around $800,000. That compares to the national median sale price, which is closer to $400,000. And so, that really makes a huge difference in the monthly mortgage payment you’re making,” said Gailey.
The Seattle-Tacoma-Bellevue area has the third-largest gap between renting and buying costs, with the average rent in the area at nearly $2,200 a month, while the typical mortgage payment is over $4,900. That’s a buy-to-rent ratio of 125%.
Gailey’s advice: If you want to buy right now you should make sure you’re in it for the long haul.
“Time in the housing market is more important than trying to time the housing market,” said Gailey.
While affordability is one of the main obstacles for aspiring homeowners, if you can afford it, then buying is a smart financial choice in the long term.
In Washington state, on average, you need a combined income of $150,000 annually to afford to buy, and more than half of aspiring homeowners say they can’t get there.
Rental rates in the area are high as well but more comparable to the national average. The average rental unit prices at $2,200, compared to a national average of about $1,950.
The most prevalently quoted conventional 30yr fixed rates are at the lowest levels in a month as of today, but there are a few “yeah buts” that make that achievement look a bit less lofty.
The first is that the rates seen on any day this week would have qualified for the same distinction if they’d remained intact today. Reason being: there was a big rate spike last month on April 10. On a related note, today’s rates weren’t appreciably lower than those seen on Tuesday.
Still… lower is lower and we’ll take it!
Today’s improvement wasn’t guaranteed. It required some sacrifices in the economic data with Jobless Claims coming in higher than expected. Then in the afternoon, the scheduled auction of 30yr US Treasury Bonds was met with solid demand. Both events helped put downward pressure on rates with many lenders ultimately issuing mid day reprices with better terms.
All of the above has played out in a very narrow range in the bigger picture. The big spike on April 10th was in a completely different league and it was exclusively a response to the Consumer Price Index (CPI). With that in mind, the next CPI will be released next Wednesday. It has just as much power to cause just as big of a move as it did last time, for better or worse.
High home prices and rates sent home sellers and buyers to the sidelines in April and the start of May. But last week’s encouraging economic news drove mortgage rates down a bit, which could bring back prospective sellers and house hunters.
The median U.S. monthly housing payment hit an all-time high of $2,894 during the four weeks ending May 5, up 14% from a year earlier, and home prices rose 4.5% to their own record high.
The supply of homes for sale lost momentum, with prospective sellers jittery about high rates. New listings rose 9% year over year, the smallest increase in three months (with the exception of the four weeks ending March 31, when there was an artificially small decline due to Easter.) There were fewer new listings during the four-week period ending May 5 than any comparable period on record except 2020 and 2023. Many would-be sellers backed off when rates rose throughout April, opting to stay put to hold onto their low mortgage rate.
Home sales fell due to high rates and low supply. Pending home sales dropped 3% from a year earlier–the biggest decline in two months. There are also signs that competition for homes is slowing during a time of year when it typically speeds up: 30% of homes sold above asking price, flat from a week earlier and down from 32% a year earlier and more than 50% two years earlier. And 6.2% of home sellers dropped their asking price, the highest share since November and up from 4.3% a year ago. But there is one signal that demand is starting to pick up: Mortgage-purchase applications increased 2% week over week.
Recent economic news brought rates down from their peak. Encouraging economic news pushed daily average mortgage rates down from a five-month high of 7.5% on April 30 to about 7.2% at the end of last week and into this week, bringing buyers a modicum of relief. The Fed held interest rates steady and kept open the possibility of a rate cut later this year at their May 1 meeting, and last Friday’s soft jobs report was another step in the right direction.
“The market is a mixed bag, with high mortgage rates causing some listings to sit longer than I would expect in the springtime and high prices holding steady,” said David Palmer, a Redfin Premier agent in Seattle. “Sellers can rest assured that there are plenty of motivated buyers who are jumping into the market now; they finally understand that rates aren’t going to plummet anytime soon. Those buyers are the people who are moving because they need to: They’re relocating for a new job, going through a divorce, or growing their family. So even though some of my listings are taking longer to sell than they would in a typical spring market, they are selling eventually.”
For Redfin economists’ takes on the housing market, including more on how current financial events are impacting mortgage rates, please visit Redfin’s “From Our Economists” page.
Leading indicators
Indicators of homebuying demand and activity
Value (if applicable)
Recent change
Year-over-year change
Source
Daily average 30-year fixed mortgage rate
7.2% (May 8)
Down from a 5-month high of 7.52% two weeks earlier
Increased 2% from a week earlier (as of week ending May 3)
Down 17%
Mortgage Bankers Association
Redfin Homebuyer Demand Index (seasonally adjusted)
Down 6% from a month earlier (as of week ending May 5)
Down 12%
Redfin Homebuyer Demand Index, a measure of requests for tours and other homebuying services from Redfin agents
Touring activity
Up 32% from the start of the year (as of May 7)
At this time last year, it was up 27% from the start of 2023
ShowingTime, a home touring technology company
Google searches for “home for sale”
Essentially unchanged from a month earlier (as of May 5)
Down 18%
Google Trends
Key housing-market data
U.S. highlights: Four weeks ending May 5, 2024
Redfin’s national metrics include data from 400+ U.S. metro areas, and is based on homes listed and/or sold during the period. Weekly housing-market data goes back through 2015. Subject to revision.
Four weeks ending May 5, 2024
Year-over-year change
Notes
Median sale price
$384,721
4.5%
All-time high
Median asking price
$419,519
6.5%
All-time high
Median monthly mortgage payment
$2,894 at a 7.22% mortgage rate
14.1%
All-time high
Pending sales
90,542
-3%
Tied with the 2 previous 4-week periods for the biggest decline in 2 months
New listings
102,449
9.3%
Smallest increase since 4 weeks ending Feb. 11, with the exception of a 6.6% increase during the 4 weeks ending March 31 (that uptick was artificially small because of the Easter holiday)
Active listings
877,829
13.3%
Months of supply
3.2 months
+0.5 pts.
4 to 5 months of supply is considered balanced, with a lower number indicating seller’s market conditions.
Share of homes off market in two weeks
44.9%
Down from 47%
Median days on market
34
+1 day
Share of homes sold above list price
30.4%
Down from 32%
Share of homes with a price drop
6.2%
+1.9 pts.
Average sale-to-list price ratio
99.4%
+0.1 pt.
Metro-level highlights: Four weeks ending May 5, 2024
Redfin’s metro-level data includes the 50 most populous U.S. metros. Select metros may be excluded from time to time to ensure data accuracy.
Metros with biggest year-over-year increases
Metros with biggest year-over-year decreases
Notes
Median sale price
Anaheim, CA (21%)
West Palm Beach, FL (15.9%)
Detroit (15.7%)
San Jose, CA (13.2%)
New Brunswick, NJ (12.8%)
San Antonio, TX (-1.9%)
Declined in just 1 metro
Pending sales
San Jose, CA (21.9%)
Anaheim, CA (9.1%)
Oakland, CA (6.1%)
San Francisco (6.1%)
Seattle (5.9%)
Phoenix (-13%)
Atlanta (-11.7%)
Houston (-11.1%)
Jacksonville, FL (-10.3%)
Orlando, FL (-10.2%)
Increased in 15 metros
New listings
San Jose, CA (35.6%)
Phoenix (25.9%)
Seattle (22.4%)
San Diego, CA (21.5%)
Oakland, CA (21.1%)
Chicago (-9%)
Newark, NJ (-4.3%)
Warren, MI (-3.9%)
Atlanta (-3%)
Detroit (-2.5%)
Providence, RI (-1.5%)
Declined in 6 metros
Refer to our metrics definition page for explanations of all the metrics used in this report.
In general, you should be skeptical any time someone says a future week will be more volatile. There’s really no way to know such things in advance, but this time is an exception.
While we can’t have any idea which direction rates will move next week, we can be sure that we’ll see more volatility. Part of the reason is that the outgoing week would have been hard pressed to be any less volatile. For rates, it was largely an aimless drift apart from two offsetting reactions to calendar events on Thursday and Friday (highlighted below).
Thursday’s sharper drop in bond yields followed a higher reading in the weekly Jobless Claims data. This was one of the only economic reports that came out this week. It showed an abnormally large change that resulted in the highest reading since August 2023. While this could prove to be an outlier, it got the market’s attention in the morning.
Thursday afternoon saw relatively strong at the scheduled auction of 30yr Treasury bonds. In general, strong auctions put downward pressure on yields/rates, all other things being equal. The present example was worth roughly the same amount of improvement as the Jobless Claims data.
While the bond market was already pushing back in the other direction on Friday morning, the Consumer Sentiment data kept things moving in the same unfriendly direction. This was not the usual case of stronger economic data pushing rates higher. In fact, headline consumer sentiment was much lower than expected.
Rather, it was a component of the report that measures consumers’ inflation expectations. This came in much higher than expected, and higher inflation is a much bigger consideration for rates at the moment.
Who cares what consumers think about inflation anyway? It’s not like they decide the price of “stuff.” True as that may be, consumer expectations play a role in purchasing behavior which, in turn, influences demand-driven changes in inflation. It’s not a perfect relationship, but there’s strong general correlation over time.
But the inflation data everyone’s waiting for is right around the corner, and this brings us to the other part of the reason that higher volatility is a lock for the coming week. On Wednesday, May 15th, the latest Consumer Price Index (CPI) will be released.
No other economic report has been as likely to cause big swings in financial markets recently. It is the first, broad, official look at inflation on any given month and, again, inflation is the biggest problem for rates these days.
Q1 inflation proved to be persistently higher than expected–a fact that coincides with interest rates moving up a fair amount from the lows seen at the end of 2023.
Some experts think the trend of elevated inflation will continue while others still expect it to start calming down any month now. With each new CPI, we get another chance to see a sign of a friendly shift. Granted, one month of data won’t work any miracles, but the market is very sensitive to the mere possibility of a shift.
There will be other economic data as well, including Retail Sales and several housing related reports, but there is no doubt about the main event. Incidentally, both Retail Sales and CPI will be released at the same time, 8:30am ET, on Wednesday morning.
Video above: What does it take to be “middle class” in America
(NEXSTAR) – Despite persistently-high mortgage rates, home prices in U.S. metro areas continue to rise in 2024, new data shows.
Over 90% of metro markets have seen gains in the first quarter of the year, according to the National Association of Realtors, with Illinois taking six of the top 10 spots. The highest year-over-year jump was in Fond du Lac, Wis. (23.7%), with Kankakee, Ill. (22%); Rockford, Ill. (20.1%); Champaign-Urbana, Ill. (20%); and Johnson City, Tenn. (19.3%) rounding out the top five.
Illinois low-income utility assistance programs may get renewed due to bill
The spike in prices in those areas happened as the 30-year fixed mortgage rate ranged from 6.60% to nearly 7%, data from the Federal Reserve Bank of St. Louis shows.
“Astonishingly, greater than 90% of the country’s metro areas experienced home price growth despite facing the highest mortgage rates in two decades,” said NAR Chief Economist Lawrence Yun. “In the current market, rising prices are the direct result of insufficient housing supply not meeting the full demand.”
In February, 2024 a Zillow report found that the U.S. now has 550 “million-dollar” cities where the average home value is at least $1,000,000. That’s up from 491 at the same time in 2023.
Looking at metropolitan areas – which can include several cities – we see some regions jumping 20% or more year-over-year.
Rank
Metro Area
YOY Increase
1.
Fond du Lac, Wis.
23.7%
2.
Kankakee, Ill.
22.0%
3.
Rockford, Ill.
20.1%
4.
Champaign-Urbana, Ill.
20.0%
5.
Johnson City, Tenn.
19.3%
6.
Racine, Wis.
19.0%
7.
Newark, N.J.-Pa.
18.8%
8.
Bloomington, Ill.
18.5%
9.
New York-Jersey City-White Plains, N.Y.-N.J.
18.4%
10.
Cumberland, Md.-W.Va.
18.2%
(NAR)
When it comes to the overall home price, California markets made up eight of the top 10 most expensive, led by San Jose-Sunnyvale-Santa Clara, Calif. ($1,840,000; 13.7%), Anaheim-Santa Ana-Irvine, Calif. ($1,365,000; 14.2%) and San Francisco-Oakland-Hayward, Calif. ($1,300,000; 14%).
“The expensive markets in the West, where home prices declined last year, are roaring back,” Yun said. “Price dips in that region were viewed as second-chance opportunities by many buyers.”
The two non-California markets in the top 10 were Urban Honolulu, Hawaii ($1,085,800; 5.5%); and Naples-Immokalee-Marco Island, Fla. ($850,000; 9.4%).
The following should be prefaced with the reminder that it is impossible to predict the future with much precision when it comes to bond market movement. That said, there are times when certain outcomes are far less surprising than others on any given day or week. For the current week, that base case involved a flat trajectory with lower volatility than the previous week, and that’s exactly what we’ve seen. This is also an entirely reasonable outcome given the extreme absence of economic data and other big ticket market movers.
If you are shopping for a new home right now, you already know interest rates have skyrocketed to an average of 7.36%. What would you say if we told you that you could get a mortgage for a rate of 3%? There is a way. Investigative reporter Bill Spencer shows us how, with the help from a husband and wife who just used an assumable mortgage to buy a home.
House hunting for their very first home has been anything but easy for Terry and Sarah Diamond.
KPRC 2’s Bill Spencer explains how you can save money buying a new home by using an assumable mortgage. (Copyright 2024 by KPRC Click2Houston – All rights reserved.)
This couple from the Dallas area toured no less than 10 different homes, but with mortgage rates now hovering around 7% and even higher, they just could’nt find the kind of house they wanted at a price they could afford.
And then, something of a miracle happened.
Suddenly Terry and Sarah found their dream home, with 4 bedrooms, a huge family room, 3 full baths, a huge kitchen and a massive backyard, all sitting on a full acre of land.
Sarah still remembers the day they closed the deal.
“It was incredible. We were out to dinner and we got the call, and I just started crying. Yeah, I was so excited. It was like a thousand pound weight off our backs,” Sarah said.
Yes, the Diamonds are a hard-working family with 2 young children, who never dreamed they could afford a house like this.
Especially right now, when so many Americans just can’t afford these astronomical home mortgage interest rates.
“It’s just ridiculous. The economy has made it where the average, you know, average American can’t afford a house anymore. You can’t buy somewhere to grow your kids up,” Terry said.
That’s when the Diamonds met real estate agent Chasatee Carbaugh with Regal Realtors in North Texas, who found them a beautiful, roughly 6-year-old home in Sanger, Texas with a 3.1% mortgage rate.
When I ask Terry what his friends think of the mortgage rate he was able to get Terry says, they are in disbelief.
“They think I’m lying. They say how did you do that? And, I’m like, an assumable mortgage and they’re like, what is that? They are stunned,” Terry said.
Yes, an assumable mortgage. What is an assumable mortgage?
If you’ve never heard of one you are not alone.
Simply put, an assumable mortgage is where the home buyer takes over the home seller’s mortgage, with the same interest rate. In this case 3.1%. Whatever the seller has already paid-down on the house, becomes the buyer’s down payment. In doing this story, we have seen assumable mortgage rates as low as 2.9% all the way up to 4.5%.
“I mean, you think back to like 2018 and 2019 when real estate was good, even some in the 2021 when there were some popping rates, and I have several clients that had rates of 2.99%, Chasatee Carbaugh said.
So, let’s take a closer look at Terry and Sarah’s assumable mortgage deal.
It works out like this, the house they bought cost $455,000. The woman they bought it from had 63,000 dollars in equity, that she had already paid-down on the home, so the diamonds down payment became $63,000. Now that’s high, about double what the Diamonds expected to pay, but with that 3.1% mortgage rate, their monthly payment became just 2,300 dollars.
KPRC 2’s Bill Spencer explains how you can save money buying a new home by using an assumable mortgage. (Copyright 2024 by KPRC Click2Houston – All rights reserved.)
With a normal 7% mortgage rate, they would have been paying more than double that amount, about 4,500 dollars a month.
All of which means, Terry and Sarah are saving more than 2,000 dollars a month.
But even more startling is that over the lifetime of their loan Terry and Sarah will be saving over 400,000 dollars.
When Sarah first heard what their monthly mortgage payment was going to be, she couldn’t believe it.
“Absolutely not. No, I didn’t believe it, I just didn’t think it was possible,” Sarah said.
“Yeah, so we were able to get this big house. This big lot. You know, out here in the suburbs and it’s great,” Terry said.
Now it’s important to know, most conventional mortgages can’t be assumed, except in very rare cases. To get an assumable mortgage, it must be a government-backed mortgage, like a V.A., F.H.A. or U.S.D.A loan. And remember, your down payment is likely to be much higher than with a traditional mortgage.
So how can you make that down payment as low as possible?
Chasatee has the answer.
“You can do it. I would look for homes that were possibly built or purchased in maybe the range from 2017, 2018, 2019 to 2021, because the owners don’t have that much equity in it for the buyers to have to assume. That means your down payment only has to cover the small amount of equity they have in that home.
As for Terry and Sarah and their two young children, they’re sitting pretty with a screaming low mortgage rate they can actually afford.
In other words, they were able to buy a home in 2024 with a 2018 mortgage rate.
“Our monthly mortgage, with it being so low, we’re not in a monthly bind. You know, we’re able to fix the flat tire. We’re able to pay the medical bills as they come. We’re able to plan a little vacation. It’s just nice to not feel financially strapped every month,” Sarah said.
RELATED: Web exclusive explains how an assumable mortgage works and what it can mean for you
Need help buying a home in Houston?
If you are a first-time home buyer, there may be help available for you. From grants to assistance with funding – there are some options you might not have thought about for financing a home. And in the Houston area right now, there are a lot more homes out there for you to check out. Bill Spencer found help for first time home buyers in the Houston area.
A weekly newsletter with the latest work from the KPRC 2 Investigates team.
Coming into this week, we expected things to be boring and sideways after last week’s more directional movement. So far, everything is going according to that plan. In order to maintain a boring, sideways stance today, the bond market needed to do a bit of selling lest the trend remain decidedly directional (it would have been the 6th straight day with lower yields). Intraday volatility was modest at best. Yields were higher at the outset and didn’t change much over the course of the day. The 10yr auction had essentially no impact, but that’s understandable as it came in fairly close to expectations.
10:54 AM
Modestly weaker overnight and into the 9am hour. Bouncing a bit since 9:40am. MBS still down an eighth and 10yr up 2.7bps at 4.485
01:03 PM
Minimal reaction to 10yr auction. MBS still down an eighth. 10yr up 3.1bps at 4.489
04:15 PM
Very sideways into the close. MBS down 5 ticks (.16) and 10yr yields up 4bps at 4.497
Download our mobile app to get alerts for MBS Commentary and streaming MBS and Treasury prices.
Mortgage rates did well last week, making it almost halfway back to the lower levels seen on April 9th. Why focus on April 9th? That was the last day before the most recent Consumer Price Index (CPI).
Why focus on CPI? That’s the monthly economic data that matters most to rate movement these days. It’s not the only game in town, but it caused the biggest recent jump, by far.
Last week’s combination of economic data and reassurance from the Fed was enough to get rates headed back in a friendly direction. There was some follow-through today, but not for any news reasons.
In fact, “reasons” for rate movement are in far more limited supply this week. In other words, last week was good and we caught a small break today with the modest improvement in rates, but things could be more choppy and sideways for the rest of the week.
Lower interest rates allowed mortgage activity to rise modestly during the week ended May 3. It was the first increase in three weeks. The Mortgage Bankers Association said its Market Composite Index, a measure of the volume of mortgage applications, rose 2.0 percent on a seasonally adjusted basis compared to the prior week and 3.0 percent before adjustment.
The Refinance Index increased 5.0 percent from the prior week but was 6.0 percent lower than the same week one year ago. The refinance share of mortgage activity increased to 30.6 percent of total applications from 30.2 percent the week before.
The Purchase Index ticked up 2.0 percent on both an adjusted and unadjusted basis but was still 17.0 percent lower than the same week in 2023.
“Treasury rates and mortgage rates fell last week on the news of a slowing job market, with wage growth at the slowest pace since 2021, and the Federal Reserve’s announced plans to ease quantitative tightening in June and to maintain its view that another rate hike is unlikely. The conventional 30-year rate dropped 11 basis points, and the FHA rate fell 17 basis points to 6.92 percent, back below 7 percent for the first time in three weeks,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “Mortgage applications increased for the first time in three weeks, with refinances up 5.0 percent. Even with the increase, which included a 29 percent jump in VA refinances, refinance application volume remains about 6 percent below last year’s already low levels.”
Fratantoni added, “Driven by a 5 percent gain in FHA applications, purchase activity was up 2 percent. First-time homebuyers account for roughly half of purchase loans, and the government lending programs are an important source of financing for these homebuyers. The gain in FHA activity is a sign that this segment of the market is active.”
Other Highlights from MBA’s Weekly Mortgage Application Survey
After declining for four straight weeks, loan sizes jumped higher. The average loan was $385,600, up from $375,200 while the size of a purchase loan rose $436,000 to $443,200.
The FHA share of total applications increased to 12.9 percent from 12.7 percent and the VA share increased to 11.7 percent from 11.3 percent. USDA applications retained the usual 0.4 percent market share.
The 11-basis point decline in the conforming 30-year fixed-rate mortgage (FRM) rate brought it down to 7.18 percent. Points were unchanged at 0.65.
Jumbo 30-year FRM had a rate of 7.31 percent compared to 7.39 percent. Points remained at 0.46.
The average rate for 30-year FRM backed by the FHA dropped to 6.92 percent from 7.09 percent,with points decreasing to 0.91 from 0.98.
Fifteen-year FRM rates averaged 6.60 percent with 0.59 point. The prior week the average was 6.74 percent and 0.63 point.
The rate for 5/1 adjustable-rate mortgages (ARMS) was unchanged at 6.60 percent,with points decreasing to 0.65 from 0.75.
ARM applications accounted for 7.7 percent of the total compared to 7.8 percent a week previous.