Mortgage rates hit their highest level in more than 20 years, pushing homebuyers’ monthly housing payments to all-time highs, according to new Redfin data.
A buyer on a $3,000 monthly budget, for instance, can afford a $419,000 home with a 7.7 percent mortgage rate, roughly the daily average on Oct. 4. That buyer has lost $38,000 in purchasing power since last October, when they could have bought a $457,000 home with a 6.6 percent rate.
By that time, buyers had already lost a significant amount of purchasing power since the start of the year, as mortgage rates doubled throughout 2022: A buyer on a $3,000 budget could have purchased a $595,000 home with the 3.5 percent rates common at the start of 2022, Redfin added.
“There are several reasons why mortgage rates are still climbing,” Redfin Economic Research Lead Chen Zhao said in a release. “The Fed hinted that another interest-rate hike before the end of the year is likely, the latest job market data came in stronger than expected, and the yield curve is steepening as investors prepare for higher rates for longer. Turmoil in Congress isn’t helping, either, as the clash among House Republicans stemming from the narrowly missed government shutdown is causing volatility in stock and bond markets.”
In addition to sky-high mortgage rates, rising home prices are cutting into buyers’ budgets. The typical U.S. home sold for $371,000 during the four weeks ending Oct. 1, up 3 percent from a year earlier.
Redfin attributed that to there not bring enough homes for sale. High housing costs are pushing demand down, with mortgage-purchase applications dropping to their lowest level in nearly 30 years. But inventory is falling significantly, too, as homeowners hang onto relatively low rates. The total number of homes for sale is down 14 percent.
A glimmer of hope for the housing market remains with more owners listing their homes for sale after months of steady decline. New listings rose 3 percent in September, and so far this fall’s listings haven’t declined as much from the summer as they typically do. That may be partly because listings didn’t have much more room to fall, according to Redfin.