There’s no place like home — and not long ago, buying one was less complicated.
As recent as 2021, the market saw record-low mortgage rates, thanks in part to the pandemic. In September of 2020, mortgage rates dipped to a record-low monthly average of 2.6% on a 30-year fixed mortgage.
Demand drove inventory down and spiked home prices. The average price of a new home sat at $391,000 before eventually spiking to $453,700 in 2021. Realtors believe this gave Americans a chance to cash-in on their home equity.
"A typical homeowner in 2020 — just by being a homeowner — they will have accumulated around $24,000 in housing wealth," said Dr. Lawrence Yun, chief economist and senior vice president of research at the National Association of Realtors.
But things have changed. The rate on a 30-year fixed mortgage has shot up over the last 12 months, now hovering at about 7%. The nearly 4% increase in a year's time comes as the Federal Reserve hikes rates in an effort to tamp down inflation.
"Even a 4% swing in interest rates could mean $300 or $400 more per month for a family. That’s a significant hit to one’s budget," said Rosalyn Merrick, a first time homebuyer.
"It’s an impact forcing potential first-time homebuyers to think twice.
"I did have to start lowering my budget with higher interest rate, I don't want to be stuck paying a crazy mortgage payment," said Keenan Crigler, another first time homebuyer.
Long-Term Mortgage Rates Now At Highest Point Since 2008
The 30-year mortgage rate jumped to 5.89% from 5.66% last week, according to mortgage buyer Freddie Mac. One year ago, the rate stood at 2.88%.
"When rates first started climbing, it wasn’t quite as drastic, but now they’re compounding where they’re continuing to rise, at that higher pace is we’re seeing more and more people drop back," said Mike Cox, a mortgage broker.
The National Association of Realtors found this year, first-time home buyers made just 26% of all home buyers. That’s down from 34% last year, and down from 50% in 2010 and according to the NAR first-time buyers are getting older with the average age at 36 years old and selling a home is now taking longer. In May a house spent an average of 31 days on the market, by September the average went up to 50 days. It’s costing more to claim the keys to the house. The median home price through October was at nearly half a million dollars an increase of over $80,000 compared to a year before and experts say that’s due to low inventory. But despite challenges, some industry experts think there’s hope for those who were shut out during the home-buying rush.
"With people pulling back, if you’re still in the market now you don’t have the competition that you had right — there are more and more price drops coming," said Amanda Furmann, a realtor.
It's a welcome sign to those aiming to buy a home of their own.
"Interest rates don't stay there, but your home will," Crigler said.
