The average homeowner is now shelling out a record $2,800 just to cover their monthly payment, as soaring house prices and rising interest rates have made owning a home more expensive than ever.
The median monthly mortgage payment jumped 11% over the past year to $2,775 for the four weeks ended April 14, according to Redfin data.
That’s an incredible 58% of full-time U.S. workers’ median pretax monthly income of $4,773 in March — calculated by taking the government’s latest weekly earnings figure and multiplying it by four.
Rising rates are largely responsible for the sharp increase in mortgage payments. The average 30-year fixed mortgage rate hit a five-month high of 7.4% this week, according to Mortgage News Daily. The result is that anyone taking out a mortgage to buy a home is paying much more each month than in the past.
The median home sales price also jumped 5% over the past year to $380,250, only about $3,100 shy of the June 2022 record, according to Redfin. People are likely borrowing more to afford increasingly expensive homes, which means they have to pay more each month.
The painful rise in mortgage costs is just a headache for households. Inflation hit a 40-year high of more than 9% in the summer of 2022 and was still running at 3.5% in March, well above the Federal Reserve’s 2% target. This reflects the rising cost of food, energy, rent and other goods and services for consumers.
The Fed’s response to the price surge was to raise its benchmark interest rate from virtually zero to over 5%. That pushed 30-year mortgage rates from around 3% in early 2022 to more than 7%, leading to higher monthly mortgage payments.
Rate hikes have also increased monthly payments on auto loans, credit cards and other types of debt. The result is that consumers face a double whammy: painful price hikes and higher monthly interest payments.
Mortgage rates actually fell earlier this year, but rebounded as stubborn inflation prompted the Fed to delay rate cuts.
The sharp rise in mortgage rates has also frozen the U.S. housing market, as potential sellers are reluctant to give up the lower rates they secured when listing their homes, and potential buyers balk at near-record prices and lower monthly mortgage payments. important.
The affordability crisis contributed to existing home sales falling 4.3% between February and March, the largest percentage decline since November 2022.
This bleak picture has led some experts to predict a buying boom once rates are lowered. “Shark Tank” investor Barbara Corcoran said housing prices would “skyrocket” if rates fell just one percentage point, while investor Bill Pulte recently suggested that they could rise 20% to a record $500,000 if the Fed cuts too soon. .
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