There’s reason talk of sticker shock has grown increasingly common in real estate: Home prices and mortgage rates have significantly increased home buyers’ costs in just one year.
Mortgage rates have risen at the fastest pace in four decades. The 30-year fixed-rate mortgage averaged 5.10% this week, Freddie Mac reports. A year ago, rates averaged below 3%.
Home prices are escalating as well. The median existing-home price for all housing types in March was $373,300, up 15% compared to a year earlier, according to National Association of REALTORS® data.
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The combination of higher rates and home prices has made monthly payments quickly climb. Home buyers of a median-price home are now facing a monthly mortgage payment that is nearly 50% higher than a year ago, George Ratiu, manager of economic research at realtor.com®, told MarketWatch. The impact is adding an extra $580 to buyers’ monthly expenses.
“It is not surprising that many are stepping back from the market, hoping that conditions will improve,” Ratiu says.
Many buyers “were already constrained by low inventories, which have been driving prices higher,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, wrote in a recent research note, as quoted by MarketWatch. “Sustained increases in mortgage rates will be an additional headwind for home sales going forward.”