The rate on a 30-year mortgage averaged around 5.54% this week, according to mortgage buyer Freddie Mac; a year ago it was close to 2.78%. The increase in rates is leaving buyers with some unwelcome options: pay hundreds of dollars more for a mortgage, buy a smaller home or choose to live in a less desirable neighborhood, or drop out of the market, at least until rates come down.
In Seattle, a hotter housing market, a $2,000-a-month payment this time last year would have gotten a buyer a modest 1,300-square-foot home. That sort of payment would get them only a 950-square-foot apartment now. For more than a decade, potential homebuyers were willing to put up with rising home prices because the cost of a mortgage was at historical lows. The average mortgage rate on a 30-year fixed-rate mortgage mostly stayed below 4.5% for most of the last decade, according to data from the Federal Reserve Bank of St. Louis.
For those who can afford to buy a home even with higher mortgage rates, the housing market slowdown has a silver lining — more options. As homes get fewer offers, they tend to linger on the market longer. The number of homes for sale, which has been rising from ultra-low levels since the spring, increased 18.7% from a year earlier, according toRaymond Martin and his wife listed their home in Austin, Texas, for sale for $1.1 million in early May.
The couple are living in a new home in Florida while patiently trying to sell the Austin property. “Clearly, the market’s kind of stalled,” he said.
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