Prospective borrowers face record-high monthly payments if they buy a home today, as the traditional spring purchase season begins.
The typical homebuyer’s monthly payment is $2,563 this week, up 29% from the same time last year, Redfin said in a report Friday. The jump from the average $1,988 monthly payment last March is the result of mortgage rates inching closer to their recent November peak.
“All eyes are on inflation as it continues to have a huge impact on mortgage rates and the housing market,” said Taylor Marr, deputy chief economist at Redfin, in a press release.
Pending home sales have been flat to begin the month and have fallen 16.1% year-over-year, defying the usual seasonal bump, the brokerage said. New sale listings have also declined 21.7% over the same period, and Redfin’s Homebuyer Demand Index, which tracks home tours and other brokerage services, is down 27% from the same time last year.
Home prices, which have dropped year-over-year for the first time in a decade, failed to make things more affordable amidst rising rates. The median sales price was down 1.2% annually at $352,750 in early March. The 30-year fixed rate mortgage this week was 6.73% according to Freddie Mac, almost double the 3.85% rate last spring. The Federal Reserve is anticipated to raise rates by a half-point later this month, which would spur further mortgage rate hikes.
A homebuyer on a $2,500 monthly budget can afford a $376,000 home under the current economic conditions, Redfin said. That’s a sizable loss from the $400,000 home the same buyer could have afforded when rates were 6%. Last March’s rates below 4% allowed the same buyer to afford a $480,000 home.
But these factors haven’t completely erased demand. Mortgage applications rose for the first time in a month, the Mortgage Bankers Association reported this week. Redfin’s Homebuyer Demand Index is also up 16% from its late-October depths.
Home prices are sliding in 23 of the nation’s 50 largest metropolitan areas, Redfin said, with pandemic-era destination San Jose recording the largest drop-off with an annual 14.6% price decline. Sellers are still enjoying windfalls with price growth in several cities, including double-digit annual growth in Milwaukee, up 10.4% year-over-year, and Palm Beach, Florida, up 10.3% annually.
Source: nationalmortgagenews.com