Housing Payments Rise to Hit Record-High $2,775 per Month: Report

Almost half of US homeowners and renters are struggling to afford their housing payments to the extent that 22 percent have begun skipping meals.
Housing Payments Rise to Hit Record-High $2,775 per Month: Report
A 'For Sale' sign is displayed in front of a new home in Fairfax, Va., on Aug. 22, 2023. (Andrew Caballero-Reynolds/AFP via Getty Images)
Naveen Athrappully

U.S. homebuyers face the prospect of having to pay a “record” amount in monthly mortgage payments to buy a house amid extremely high prices and elevated mortgage rates, according to brokerage Redfin.

“The median U.S. home-sale price increased 5 percent from a year earlier during the four weeks ending April 14, bringing it to $380,250—just $3,095 shy of June 2022’s all-time high,” said an April 18 press release from Redfin. “The average daily mortgage rate this week surpassed 7.4 percent, the highest level since last November, after a hotter-than-expected inflation report and the Fed’s confirmation that interest-rate cuts will be delayed.” The 12-month inflation had jumped 0.3 percent, to 3.5 percent in March.

“The combination of high mortgage rates and prices have brought homebuyers’ median monthly housing payment to a record $2,775, up 11 percent year over year.”

Despite higher mortgage rates, there are buyers still touring homes, Redfin said. The company’s Homebuyer Demand Index, which measures requests for tours and other buying services from Redfin agents, is at the highest level in seven months. In addition, mortgage-purchase applications are up by 5 percent over the week, it said.

According to Chen Zhao, Redfin’s economic research lead, some prospective customers are opting to buy homes now as they are concerned rates could go even higher. Meanwhile, others have grown accustomed to the high rates and have pushed down their home buying budget.

“Home sales are slower than usual, but there are still people buying and selling because if not now, when?” said Connie Durnal, a Redfin premier agent in Dallas.

“I’ve had a few prospective buyers touring homes for the last several years, since mortgage rates started going up, and they wish they would have bought last year because prices and rates are even higher now. My advice to them: If you can afford to and you find a house you love, buy now. There’s no guarantee that rates will come down soon.”

According to data from Freddie Mac, the average 30-year fixed-rate mortgage has risen from 6.62 percent for the week ended Jan. 3, 2024, to 7.10 percent for the week ended April 17.

This is the first time that the 30-year fixed-rate mortgage rate crossed 7 percent this year, said Sam Khater, Freddie Mac’s chief economist.

“As rates trend higher, potential homebuyers are deciding whether to buy before rates rise even more or hold off in hopes of decreases later in the year. Last week, purchase applications rose modestly, but it remains unclear how many homebuyers can withstand increasing rates in the future,” he said.

While many experts forecast mortgage rates to decline below 7 percent this year, elevated inflation poses a roadblock to such predictions.

“The jury is still out as to whether what we’re seeing with inflation is just a blip or a threat to undo some of the progress toward lower inflation seen in 2023,” said Greg McBride, CFA, chief financial analyst for Bankrate.

“It’ll be difficult for mortgage rates to post a meaningful and sustained pullback from 7 percent until there is greater consensus on what is next with inflation.”

Housing Affordability Woes

Bloated housing payments are affecting home affordability for Americans. Some experts warn that the situation may not ease down anytime soon.

“For homebuyers, the latest CPI report means mortgage rates will stay higher for longer because it makes the Fed unlikely to cut interest rates in the next few months,” said Mr. Zhao, referring to the Consumer Price Index.

“Housing costs are likely to continue going up for the near future, but persistently high mortgage rates and rising supply could cool home-price growth by the end of the year, taking some pressure off costs.”

According to an April 12 Redfin survey, 38 percent of renters in the country believe they will never own a home, up from 27 percent less than a year back. Lack of affordability was the key reason why respondents thought they were unlikely to have their own homes.

Among respondents who did not think they’ll buy a home in the near future, 44 percent said it’s because houses are now too expensive, 35 percent were worried about their ability to save for a downpayment, 33 percent were concerned about affording mortgage payments, and 32 percent were worried about high mortgage rates.

“Housing costs are high across the board, but renting is a more affordable and realistic option for many Americans right now—especially those who have never owned a home and aren’t able to tap into equity from a previous sale,” said Daryl Fairweather, Redfin’s chief economist.

“While owning a home is usually a sound long-term investment, the barriers to entry and upfront costs of buying are higher than renting. Buying typically requires a sizable down payment and approval for a mortgage—things that are difficult for many people today, when the typical down payment is near $60,000 and mortgage payments are sky-high.”

An April 5 Redfin survey showed that almost half of U.S. homeowners and renters were struggling to afford their housing payments. Among such people, 22 percent skipped meals, 20.7 percent worked extra hours, and 20.6 percent sold their belongings.

According to a recent analysis by Bankrate, Americans now need an annual income of $110,871 to afford a median-priced home of $402,343. This is an almost 50 percent increase over a period of just four years.

A six-figure annual income is now mandatory to afford a median-priced home in 22 states and the District of Columbia. Four years ago, only six states and the District of Columbia had such a high requirement.