Housing Payments Rise Across US Despite Fall in Home Prices

A home stands for sale in a Brooklyn neighborhood with a limited supply of single family homes in New York on March 31, 2021. Spencer Platt/Getty Images

Even though U.S. home prices have fallen by their biggest margin in over ten years, monthly housing payments have hit a record high, according to real estate brokerage Redfin.

Median home-sale price fell 2.6 percent from a year back during the four weeks ending April 16, Redfin said in a press release Thursday—the biggest decline in more than a decade and the eighth straight four-week drop. Home prices fell in 30 of the 50 most populous U.S. metros. Despite the price drop, the typical homebuyer’s monthly housing payment hit an “all-time high” of $2,538 as average weekly mortgage rates rose to 6.39 percent. This is up $265, or 12 percent, from 2022.

Redfin points out that homebuyers are “backing off” from the housing market and suggests elevated housing costs to be a reason.

Pending home sales are down 19 percent from 2022, and mortgage purchase applications fell 10 percent over the past week, it noted. Meanwhile, buyers are also facing a shortage of homes available for sale, with listings down by 21 percent.

“Homebuyers are window shopping, and many are entering the store, but few of them are making it to the cash register yet,” said Redfin Deputy Chief Economist Taylor Marr. “There’s not much on the shelves to choose from, and high mortgage rates and still-high prices are making homes too expensive for many buyers.

“Some buyers are discouraged by mortgage rates rising this week, which is partly due to stronger-than-expected bank earnings making it more likely the Fed will hike interest rates next month.”

Affordability Issues

According to data (pdf) from the National Association of Realtors, the monthly principal and interest payment for a home was $1,827 in February 2023, up 32 percent from $1,384 a year back.

However, median family income only rose 6 percent during this period, from $85,952 to $91,152.

As a percentage of income, the monthly payment rose from 19.3 percent to 24.1 percent. The qualifying income for a mortgage rose from $66,432 to $87,696. Meanwhile, the median price of an existing single-family home fell from $370,000 to $367,500.

A U.S. Home Affordability Report issued by ATTOM, a curator of real estate data, shows that median-priced single-family homes and condos were less affordable in the first quarter of this year compared to the historical averages in 94 percent of American counties.

This is a big jump compared to last year. In the first quarter of 2022, only 62 percent of counties had homes that were less affordable than the historical averages.

Homeowners Hesitant to Sell

Meanwhile, some homeowners are hesitating to sell their properties. Redfin attributes the decline in homes available for sale on high mortgage rates that are forcing homeowners to hang on to their existing homes.

Many homeowners are hesitant to sell in the current market as this would mean they would have to pay a higher mortgage rate for a new home.

Jennifer Bowers, a Redfin real estate agent in Nashville, pointed out that one of her sellers received multiple offers on their home but pulled the listing off the market when they discovered that they would have to pay higher interest rates.

“There are a lot of homeowners who don’t want to give up their 2.5 percent or 3 percent rate for a 6.5 percent rate. Both buyers and sellers are having a tough time adjusting because rates are swinging up and down so quickly,” she said in an April 19 press release.

Some homeowners are taking advantage of the limited supply in the market. “Many sellers are sitting on a ton of equity. Maybe they bought their home 10 years ago, and it’s gone up in value by hundreds of thousands of dollars,” said local Redfin agent Marshall Carey. “Even with high rates, it’s a good time to move up because they have so much money in the bank to get a nicer home in a better location.”