No End in Sight? Home Prices Keep Climbing Despite Higher Mortgage Rates

Home prices continued to churn higher even as mortgage interest rates jumped, keeping the housing market pricey and competitive.

Across the country, the average home price was 8.6% higher in the third quarter of the year compared with a year ago, according to a recent report from the National Association of Realtors®. That shows that demand for housing remains strong, despite the higher prices and mortgage rates.

However, buyers had to pay up. The monthly mortgage payment on the average house was $1,840, the report found, up a whopping 50% from a year ago.

That meant buyers had to earn quite a bit more to afford a home. They needed to make about $88,300 to purchase the typical home, nearly $40,000 more than they did before the COVID-19 pandemic, according to NAR.

While prices are still rising briskly, they’re not going up by as much as they have been. Buyers simply can’t afford to pay these higher monthly prices given the higher mortgage rates.

Rates for home loans have skyrocketed in 2022, making things even more challenging for many house hunters. The average 30-year fixed-rate mortgage started the year at 3.22%, according to Freddie Mac, and averaged more than double that at 7.08% in the week ending Nov. 10. The increase can add hundreds of dollars—or much more—to a monthly mortgage payment.

“Much lower buying capacity has slowed home price growth, and the trend will continue until mortgage rates stop rising,” said NAR Chief Economist Lawrence Yun in a statement.

Where are home prices rising the most?

While prices gained in nearly every metro area, there were some big discrepancies. Home values surged by double digits in several parts of Florida and the South. The Southern region saw the largest price jumps—11.9%—in the third quarter.

“We have all these people moving in, and we’re not building at a pace sufficient to keep up with folks,” says Ken H. Johnson, a housing economist and associate dean at Florida Atlantic University in Boca Raton, FL. “There’s a supply and demand battle that’s going on that’s going to help prop up Florida prices.”

In contrast, NAR found, gains were much more modest in the West, which is home to some of the priciest metro areas in the country. Prices in the region, which includes expensive California, rose 7.4%.

“The more expensive markets on the West Coast will likely experience some price declines following this rapid price appreciation,” Yun notes.

In fact, the San Francisco area was one of only four metros to see year-over-year price declines in the third quarter. Prices dropped 3.7% in the San Francisco metro. The others were Cumberland, MD, at -4.5%, Bismarck, ND, at -4.1%, and Binghamton, NY, at -1.1%.

In the Midwest, where prices gained 6.6%, would-be buyers might have a better shot at finding something in their price range. Many metros in Illinois, Ohio, and Iowa are among those with the lowest prices across the country, as well as being the areas where the lowest incomes will go the furthest, according to the NAR report.

Johnson cautions, however, that anyone looking to buy in parts of the country where populations could flatline or even decline should think carefully about their decision. He includes several Rust Belt metros in that category as there often aren’t as many good-paying jobs in struggling cities.

“Price declines there will be significantly greater than in the Sun Belt,” he says.

Stephen Freudenberg, head of homeownership at real estate startup Gravy, notes that the housing market remains challenging throughout the country, particularly for first-timers. He hears from buyers all over the country who are still having to outbid multiple offers for the same house, even if it’s a bit less frenzied than a year ago.

“The market is good for sellers who have all this equity and low housing payments, but there’s still an affordability problem for first-time buyers,” Freudenberg says.

Content Source

News Press Ohio – Latest News:
Columbus Local News || Cleveland Local News || Ohio State News || National News || Money and Economy News || Entertainment News || Tech News || Environment News

Related Articles

Back to top button