William Simpson
The cost of buying a home has risen to new records this month, making homeownership an even more difficult task for the typical American.
The median U.S. home sale price — what buyers actually paid for a property — hit $387,600 during the four weeks ending May 19, a 4% increase from a year earlier. according to according to a new report from online real estate brokerage Redfin. The monthly mortgage payment at that price — given the average U.S. interest rate of 7.02% for a 30-year mortgage — is now $2,854, Redfin said. Mortgage rates rose slightly from last week’s 6.99%.
The country’s average asking price — what sellers expect their properties to be worth — hit a record $420,250, a 6.6% increase from the previous year. Redfin drew its data from tracking home sales activity in more than 400 metro areas between April 21 and May 18.
As a result of high prices, pending home sales fell 4.2% from the year before the report. The drop comes amid the spring home buying season, a period when real estate activity tends to recover. But as prices rise, the prospect of owning a home becomes a greater challenge for Americans, especially first-time buyers, some of whom opt out.
“[E]high mortgage rates and high home prices have kept some buyers on the sidelines this spring,” Lisa Sturtevant, chief economist at Bright MLS, told Redfin.
Buying a home has become such a hurdle for Americans that the Biden administration proposed giving a separate $10,000 tax credit to current homeowners who sell their “starter home” to buy a larger home.
Economists point to two main reasons for the relentless rise in home prices: continually strong demand and a long-standing shortage of inventory.
“More new listings are hitting the market and the increased supply is expected to spur more homebuying activity,” Lisa Sturtevant, chief economist at Bright MLS, said in a statement earlier this week. “However, the long-awaited inventory gains are occurring at the same time that 7% mortgage rates and record home prices are turning away more and more buyers.”
Mortgage Rates Still Too High
Higher mortgage rates have also impacted some current homeowners. Because many purchased or refinanced their properties in the early years of the pandemic — when rates fell below 3% — some are now wary of selling their homes because doing so would likely mean taking on a new mortgage at today’s high rates.
“Buying buyers feel trapped because they are ready for their next home, but it just doesn’t make financial sense to sell with current interest rates so high,” said Sam Brinton, a Redfin real estate agent in Utah, in a statement Thursday. .
To be sure, not all homeowners will stay where they are, Brinton said. Despite high mortgage rates, some sellers are moving forward because they have no choice, he said.
“One of my clients is selling because of a family emergency, and another couple is selling because they have a child and simply don’t have enough space,” Brinton said in his statement. “Buyers should note that many of today’s sellers are motivated. If a home has no other offers on the table, offer below the asking price and/or ask for concessions because many sellers are willing to negotiate.”
