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An upswing in both mortgage rates and home prices in recent months has ensured that buyers with steady incomes are once again losing purchasing power on the market.
As rates crept back up near 7 percent, buyers looking to lock in a $3,000 house payment lost $30,000 in purchasing power in the last five months alone, according to the latest report from Redfin’s data team. And rising home prices appear to be pushing even more homes further out of reach.
The median home-sale price was 1.5 percent higher in the four-week period ending July 9 than it was at the same point last year. That’s the first year-over-year increase in home prices Redfin has reported since February.
How is this kind of upward price momentum possible in a market where pending home sales are down 15 percent year over year? It’s not just buyers that have been leaving the market. Sellers are bailing even more quickly, with new listings down 27 percent since the same period last year.
For buyers, the rise in mortgage rates in recent months has exacerbated the issue. Nearly all homeowners have a mortgage rate below 6 percent now, and many would-be movers locked in rates below 4 percent by either purchasing or refinancing during the early pandemic era of ultra-cheap loans.
But buyers may get a boost if rates come back down, and Redfin Economic Research Lead Chen Zhao expects just that after reviewing the most recent inflation data.
“Because elevated mortgage rates are responsible for both of today’s major homebuying challenges–high monthly housing payments and low inventory–any decline is welcome news for buyers,” she said in a statement. “But even though rates will come down slightly, they’ll likely remain well above 6% until the Fed sees several more months of inflation readings closer to their target.”
In the meantime, however, mortgage rates have been pushing upward closer to 7 percent, back nearly as high as their recent peak in October.
In the four-week period ending July 6, this rate spike has moved the monthly mortgage payment on the median home by asking price to $2,627. That’s about $300 more per month than at this time last year, and only a slight dip from the all-time high of the previous few months.
Chart by Redfin
