The higher rates, combined with high home prices, are creating a housing market of “haves and have-nots,” says NAR’s deputy chief economist.
Home buyers are being forced to adjust to what is becoming a new norm: Mortgage rates above 7%. At this week’s average of 7.19% for a 30-year fixed-rate mortgage, as reported Thursday by Freddie Mac, the typical monthly mortgage payment on a median-priced home of $413,500 would translate to $2,243, says Jessica Lautz, deputy chief economist at the National Association of REALTORS®.
“The elevated rates impact where a buyer can purchase and how much home they can afford today,” Lautz says. Indeed, the average loan size on a purchase application last week soared to $416,800—the highest level in six weeks, the Mortgage Bankers Association reports.
The higher rates and home prices are creating a housing market of “haves and have-nots,” Lautz says. “The typical first-time, single or minority buyer has no ready cash to purchase a home,” she adds.
Meanwhile, current homeowners can leverage the record-high equity in their homes when purchasing again. They’re part of a group of buyers fueling the all-cash market, where higher mortgage rates are having no impact. In August, all-cash transactions comprised 27% of the housing market, NAR’s data shows.
Freddie Mac reports the following national averages with mortgage rates for the week ending Sept. 21:
- 30-year fixed-rate mortgages: averaged 7.19%, rising slightly from last week’s 7.18% average. A year ago, 30-year rates averaged 6.29%.
- 15-year fixed-rate mortgages: averaged 6.54%, increasing from last week’s 6.51% average. Last year at this time, 15-year rates averaged 5.44%.