The cost of buying a new house just hit a fresh record as mortgage rates rose to the highest level this year, according to a new report.
Findings from Redfin show the combination of steep mortgage rates and elevated home prices has pushed the median monthly housing payment to a record $2,775 – an 11% increase from the same time last year.
"Market conditions for homebuyers remain challenging with few homes listed and costs for ownership still climbing," said Ben Ayers, Nationwide senior economist. "Despite strong fundamentals for demand from demographics and a strong labor market, many first-time buyers are being shut out of the market by elevated financing rates and rising prices."
MORTGAGE CALCULATOR: SEE HOW MUCH HIGHER RATES COULD COST YOU
There are a number of driving forces behind the affordability crisis. Years of underbuilding fueled a shortage of homes in the country, a problem that was later exacerbated by the rapid rise in mortgage rates and expensive construction materials.
Higher mortgage rates over the past three years have created a "golden handcuff" effect in the housing market. Sellers who locked in a record-low mortgage rate of 3% or less during the pandemic began have been reluctant to sell, limiting supply further and leaving few options for eager would-be buyers.
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Economists predict that mortgage rates will remain elevated for the first half of 2024 and that they will only begin to fall once the Federal Reserve starts cutting rates. Even then, rates are unlikely to return to the lows seen during the pandemic. On top of that, investors are growing skeptical about the odds of a Fed rate hike this year given the string of hotter-than-expected inflation reports at the beginning of the year.
"Some house hunters are hoping to buy now because they’re concerned rates could rise more, and others have grown accustomed to elevated rates and pushed down their home-price budget accordingly," the Redfin report said.
Mortgage buyer Freddie Mac said Thursday that the average rate on a 30-year loan this week crossed the 7% threshold for the first time this year, jumping from 6.88% to 7.1%. While that is down from a peak of 7.79% in the fall, it remains sharply higher than the pandemic-era lows of just 3%.
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Available home supply remains down a stunning 34.3% from the typical amount before the COVID-19 pandemic began in early 2020, according to a separate report published by Realtor.com.
Most homeowners say they are nearly twice as willing to sell their home if their mortgage rate is 5% or higher, according to a separate Zillow survey. Currently, about 80% of mortgage holders have a rate below 5%.
