If the spring housing market was a bust for would-be homebuyers, the summer isn’t shaping up any better.
People who purchased a home in the last few weeks may be saddled with an average mortgage payment that has never been higher, according to real estate broker Redfin. Its report shows high home prices and an uptick in mortgage rates pushed the typical homebuyer’s monthly payment up to a record $2,656.
Daily average mortgage rates are starting to moderate, thanks to cooling inflation, but Redfin says house payments are likely to remain elevated because even slightly lower rates may escalate competition for the few homes on the market and push up prices for the foreseeable future.
In a normal market, a decline in home sales would probably lead to some housing bargains. That isn’t happening because there is still strong demand for nearly every home that is on the market. Low inventory levels are keeping home prices from falling back to earth.
Redfin’s Homebuyer Demand Index, a measure of early-stage demand that tracks requests for tours and other buying services from Redfin agents, is up 2% from a year ago. Pending home sales are down 15% year over year, but new listings are down 25%, with homeowners who have a low mortgage rate reluctant to move.
The total number of homes for sale is down 16%, the biggest drop in a year and a half. For this time of year, there is an unusual decline in new listings.
Adjusting to higher mortgage rates
“Even though buyers are trepidatious about high mortgage rates, we’re seeing bidding wars in several pockets of the market because there are so few options and even fewer good options,” said Redfin Premier agent Jordan Hammond, of Raleigh, N.C. “Condos, townhouses and new construction homes are selling quickly, partly because they don’t require much work and people can’t afford to fix up a home when they have such high monthly mortgage payments.”
After over a year of high mortgage rates, Hammond says buyers have gotten over the shock and are adjusting to cutting expenses in order to pay their mortgage. He said they are also searching for smaller homes, and “thinking outside the box to reduce their monthly payments, doing things like rate buydowns or large down payments.”
The daily average 30-year fixed mortgage rate was 6.87% on July 19, down from a half-year high of 7.22% two weeks earlier. For the week ending July 13, the average 30-year fixed mortgage rate was 6.96%, the highest level since November.