Average house payments up 20% since December

Photo (c) Mike Kemp - Getty Images

An industry report finds that affordability is becoming an issue for many buyers

Home prices are still rising, and mortgage rates crossed 5% for the first time in years last week. But what does that actually mean for people buying a home this month?

A new report from Zillow shows that the average monthly house payment has increased 20% since December, just over three months ago. Despite this, the pace and volume of sales picked up in March, showing the depth of the pool of homebuyers willing and able to meet current asking prices. 

The report underscores the challenges facing consumers who are trying to purchase a home this spring. The typical home is valued 20% more than it was 12 months ago. The average mortgage rate has risen from below 3% a year ago to a little over 5% now.

‘Breathtaking speed’

Doing the math, Zillow estimates that the average monthly payment is now 38% more than it was at this time in 2021 – and that assumes a 30-year mortgage with a 20% down payment.

"Higher mortgage rates were anticipated this year, but the speed of their rise has been breathtaking," said Jeff Tucker, Zillow’s senior economist. "Record low mortgage rates had been an affordability lifeline during the pandemic, keeping monthly payments in check even while prices climbed quickly.”

An analysis of ConsumerAffairs reviews shows that many people were already struggling to make house payments, even before rates rose and inflation took off. Teresa of Noblesville, Ind., turned to AAG for help.

“I’ve been making house payments, but I’ve been struggling making them,” Teresa wrote in a ConsumerAffairs review.

Hillary, of Rio Ranco, N.M., found herself in a similar situation recently and got some assistance from Freedom Debt Relief, which she said helped her reduce her debt.

“I was still able to live with on my means and pay my house payment and put food on the table,” she told us.

Biggest test yet

With the cost of purchasing and financing a home rising so quickly, Tucker said March was the biggest test yet of whether enough buyers can meet the new asking prices to keep home values growing at a record pace. So far, he says the answer is yes.

“There will be a point when the cost of buying a home deters enough buyers to bring price growth back down to Earth, but for now, there is plenty of fuel in the tank as home shopping season kicks into gear," Tucker said.

If there was a bright spot in the report, it might have been increasing choices. After six consecutive months of falling inventory — a streak that lasted longer than usual into the year — the number of available homes in March rose 11.6% over February, the largest one-month jump in Zillow's records.

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