Over the past decade, the sales price of a median US home has doubled, increasing by 50 percent in the last five years.
Americans are facing the challenge of putting up more money than ever to purchase a home, as mortgage rates rise and home prices soar, leading to higher housing costs.
According to a Redfin press release on April 25, the median U.S. home-sale price reached a record $383,725 in the four weeks ending April 21, marking a 5.2 percent increase from the previous year—one of the largest jumps since October 2022. Average weekly mortgage rates have risen to 7.1 percent, reflecting the Federal Reserve’s decision to maintain higher interest rates for a longer period. This is the highest weekly mortgage rate since November of the previous year.
The combination of high home prices and elevated mortgage rates has pushed the median monthly housing payment to a record $2,843, a 13 percent increase from the previous year.
Although new listings have increased by 10.2 percent for the year, the overall inventory of homes for sale remains low. Despite mortgage rates exceeding 7 percent, demand for homes remains steady.
Chen Zhao, Redfin Economic Research lead, advises sellers to price their homes fairly to attract buyers from the start and avoid having to reduce prices later due to high mortgage rates. For serious buyers who can afford current costs, Zhao recommends shopping for a dream home this year, acknowledging that finding a bargain may be challenging due to sustained high housing costs.
With mortgage costs on the rise, more people are opting for all-cash purchases of homes. According to Redfin, 34.5 percent of homes purchased in February were all-cash sales, up from 33.4 percent the previous year. Others are making larger downpayments to mitigate the impact of high mortgage costs on monthly payments.
However, some buyers, especially first-time homebuyers, may not have the equity from a previous home sale to make such payments. This situation is widening the wealth gap between individuals of different races, generations, and income levels, as highlighted by Mr. Zhao.
A recent Redfin survey revealed that 38 percent of current homeowners believe they cannot afford to buy a home at current prices. The survey also showed that the sales price of a median U.S. home has doubled over the past decade, with a 50 percent increase in the last five years alone.
According to a Bankrate analysis, U.S. citizens now need to earn over $100,000 a year to purchase a median-priced home, with the income required to qualify for a home purchase increasing by nearly 50 percent over the past four years.
As housing costs continue to rise, finding an affordable home within budget is becoming increasingly challenging, according to Bankrate housing market analyst Jeff Ostrowski.
With home values reaching record highs, the cost of a typical home exceeding $1 million is prevalent in 550 American cities, as reported by Zillow. This trend may persist as the prospect of significant declines in mortgage rates diminishes due to high inflation and a strong economy.
Lawrence Yun, chief economist at the National Association of Realtors, noted that the recent inflation figures may lead to unfavorable news for interest rates, indicating that housing costs are likely to remain high in the near future.
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