Mortgage rates continue to ascend, hammering home buyers.
The 30-year fixed mortgage averaged 7.08% in the week ended Oct. 27, according to Freddie Mac, the first reading above 7% in 20 years.
The rate stood at 6.94% a week earlier and 3.14% a year earlier. A home buyer taking out a 30-year $250,000 loan at that 7.08% rate would owe $1,677 a month before taxes and fees.
The mortgage rate increase is “leading to greater stagnation in the housing market,” said Sam Khater, Freddie Mac’s chief economist.
“As inflation endures, consumers are seeing higher costs at every turn, causing further declines in consumer confidence this month. In fact, many potential homebuyers are choosing to wait and see where the housing market will end up, pushing demand and home prices further downward.”
If you’re looking for a house, you too may want to wait for better prices.
Home Sales, Prices
In other housing news, existing-home sales fell 1.5% in September from August, the eighth straight monthly decline, according to the National Association of Realtors (NAR). Sales were down 23.8% from a year earlier.
The median existing-home sales price totaled $384,800 in September, down 1.2% from $389,500 in August. That represents the third straight monthly decline. Prices were up 8.4% year over year.
NAR Chief Economist Lawrence Yun also noted the problems created by surging mortgage rates.
"The housing sector continues to undergo an adjustment due to the continuous rise in interest rates," he said. “Expensive regions of the country are especially feeling the pinch and seeing larger declines in sales."
When it comes to housing supply and demand, "despite weaker sales, multiple offers are still occurring, with more than a quarter of homes selling above list price due to limited inventory," Yun said.
"The current lack of supply underscores the vast contrast with the previous major market downturn from 2008 to 2010, when inventory levels were four times higher than they are today."
Affordable Homes
If you’re looking for an affordable home, Point2, a real estate search web site, compiled a study of the affordability of starter homes in the 50 largest cities.
The study defines affordable homes as ones where the monthly mortgage payment represents no more than 30% of a renter’s median household income in the city. Starter homes are ones that stand in the bottom third of the city’s price range of homes for sale.
The only affordable cities for starter homes are:
1. Detroit: Median renter income equals 131% of the total needed to make a starter home affordable. Median starting home price: $48,000.
2. Tulsa: Median renter income equals 119% of the total needed to make a starter home affordable. Median starting home price: $95,000
3. Memphis: Median renter income equals 111% of the total needed to make a starter home affordable. Median starting home price: $87,000
4. Oklahoma City: Median renter income equals 100.4% of the total needed to make a starter home affordable. Median starting home price: $126,000.
