Mortgage rates in the US are a whisker away from a seven-handle, but home prices are rising again. And not just on a monthly basis either.
On the heels of last week’s bond selloff, the 30-year fixed rose 15bps, according to the latest update from Freddie Mac.
At 6.96%, financing costs are within striking distance of the highs seen in late October and early November.
It was the third straight weekly increase. All else equal, you’d be inclined to suggest this might translate to lower demand and, eventually, lower prices. Alas, “this time is different.” (Sorry.)
The acute shortage of resale inventory continues to put a floor under prices for roofs. Indeed, Redfin data released on Thursday showed US home prices rose 1.5% YoY in the four-week period to July 9. Note the emphasis.
It’s no secret that prices are rising again on a monthly basis, but home values peaked around this time last year, or at least according to some indexes and measures. If prices are going up again on a YoY basis, that suggests new record highs are in the offing. And just as mortgage rates are likewise closing in on what, for many borrowers, feel like record-highs.
The figure above illustrates the point. Note the blue line overtaking the black line. If you assume prices nationwide were at or near records last summer, the market is poised for new records this summer.
The median sale price earlier this month was $383,750, a mere $2,500 below the record high hit in June of last year. New listings fell almost 27% YoY, the largest drop since May of 2020.
If you’re wondering what all of this means for mortgage payments, Redfin noted that at 6.81% (a handful of basis points below current levels), monthly mortgage payments on the median home (assuming the asking price) are $2,627, effectively the highest ever and up double-digits from last year.
For all intents and purposes, we can say that both prices and mortgage payments are at record highs. With both still rising.
As Redfin’s Dana Anderson observed, “a buyer on a $3,000 monthly housing budget has lost $30,000 in purchasing power over the last five months.”
