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The Cost of Buying a House Reaches a New Record High
By Pete Grieve MONEY RESEARCH COLLECTIVE
The median monthly payment for a home climbed to $2,775 recently.
A spike in mortgage rates — plus high prices in the current spring market — pushed the cost of a home purchase up to a new all-time high.
The median monthly payment for a home climbed to $2,775, which is a record high and an 11% increase from a year ago, according to Redfin.
Current mortgage rates are a big reason why costs are so high for homebuyers now. Mortgage rates closely depend on the Fed’s benchmark rates and expectations about where they’re headed. When inflation numbers came in hot last week, it pushed back expectations about when the Federal Reserve will cut interest rates.
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View RatesBank of America, for example, now only expects one interest rate cut this year — and not until December. And on Tuesday, Fed Chair Jerome Powell confirmed that it will “likely to take longer” to reach the appropriate time to cut, considering the recent data.
It was the opposite of what potential homebuyers wanted to hear. These developments contributed to a one-week jump in mortgage rates of nearly a quarter of a percentage point.
Housing costs jump as mortgage rates exceed 7%
According to Freddie Mac, the rate on a 30-year fixed-rate loan averaged 7.10% for the week ending April 18, which is the highest average so far this year. (Redfin’s analysis is based on different mortgage data that places the average at 7.4%.)
Despite high mortgage rates, home prices are still climbing. The median sale price over the past four weeks was $380,250, which is 5% higher than the median at the same time last year, according to Redfin.
The National Association of Realtors (NAR) similarly reports that existing-home sale prices are up 4.8% in the past year. Even as the inventory of homes for sale increased nearly 5% from February to March, “the increased competition among sellers didn’t appear to hurt home prices,” the NAR said in a report.
In a separate analysis of the NAR’s latest data, Orphe Divounguy, senior economist at Zillow, explained that sellers are coming off the sidelines this spring home-buying season, but “buyers — faced with a sharp increase in mortgage rates at the start of the year — have been slower to return.”
The good news: As home inventories rise amid lower buyer demand, house hunters should start to see some price cuts soon, Divounguy adds.
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Pete Grieve is a New York-based reporter who covers personal finance news. At Money, Pete covers trending stories that affect Americans’ wallets on topics including car buying, insurance, housing, credit cards, retirement and taxes. He studied political science and photography at the University of Chicago, where he was editor-in-chief of The Chicago Maroon. Pete began his career as a professional journalist in 2019. Prior to joining Money, he was a health reporter for Spectrum News in Ohio, where he wrote digital stories and appeared on TV to provide coverage to a statewide audience. He has also written for the San Francisco Chronicle, the Chicago Sun-Times and CNN Politics. Pete received extensive journalism training through Report for America, a nonprofit organization that places reporters in newsrooms to cover underreported issues and communities, and he attended the annual Investigative Reporters and Editors conference in 2021. Pete has discussed his reporting in interviews with outlets including the Columbia Journalism Review and WBEZ (Chicago's NPR station). He’s been a panelist at the Chicago Headline Club’s FOIA Fest and he received the Institute on Political Journalism’s $2,500 Award for Excellence in Collegiate Reporting in 2017. An essay he wrote for Grey City magazine was published in a 2020 book, Remembering J. Z. Smith: A Career and its Consequence.