A lot of considerations go into buying a home but the cost of financing is a big one, especially if the home is $400,000 to $500,000 or more. With current interest rates, it’s hard to keep the monthly payment within 30% of gross income.
Last week mortgage rates ticked higher, getting closer to 7%. Freddie Mac reported the average 30-year fixed-rate mortgage rate increased to 6.96%. That’s 1.74% higher than a year ago.
Analysts say the increase is the product of a resilient economy with low unemployment and strong wage growth, which historically has kept purchase demand solid.
But if you are a potential buyer, all is not lost. Despite higher interest rates, a monthly payment doesn’t have to be that much higher if you can get the home at a reduced price. And even with reduced inventory, that appears to be happening in many markets.
‘Returning to normal’
"The housing market is returning to normal seasonal patterns, and that's a positive sign for buyers who faced stiff competition this spring," said Zillow senior economist Nicole Bachaud.
"As summer winds down and kids head back to school, home shopping gets put on the back burner. Traditionally, buyers who remain in the market gain a bit more bargaining power heading into the fall.”
The typical U.S. home value climbed 0.9% from June to July — a rapid pace for this time of year, but slower than the 1.4% growth in the two preceding months. The nation's typical home value is now $349,679, which is 1.4% higher than last July and 46% above pre-pandemic levels in February 2020.
Austin was the only major market in which home values dipped from June to July, falling 0.5%. The slowest monthly home value growth was in San Antonio, which slowed 0.2%, Denver, which also experienced a 0.2% decline, Birmingham, where growth slowed by 0.3% and Memphis, which also declined 0.3%.
Fannie Mae’s latest housing sentiment survey found a record number of Americans agree that now is a bad time to buy a home. That could mean there will be less competition, and if you need to buy now, it could actually work in your favor.
