Mortgage rates have been going up this year, with the shelter index, which covers rent and mortgage costs, showing a sharp rise in the last few months.
This has already started to affect house prices. According to a new report from the real estate marketplace Zillow, house prices fell significantly last month.
After record-high property prices earlier this year, higher mortgage rates have started to make buying a home less affordable for millions of potential buyers.
The Zillow report shows that a typical mortgage payment on the purchase of an average house was $1,919 in October, which includes a 20% down payment. This was a 77% increase compared with the previous year and a 107% increase from 2019.
However, inflation may have peaked, and there are signs that mortgage rates could start to stabilize. A report chartered by the US congress found that the average rate on a 30-year fixed-rate mortgage fell from 7.08% last week to 6.61% this week.
As people’s affordability continues to be stretched, most experts predict that prices will continue to fall, although Zillow’s report believes that they won’t decline as quickly as expected. Home inventory levels are still low, as fewer homeowners are putting their houses on the market.
Many current homeowners have fixed-rate mortgages at rates between 3% and 4%, and until these rates expire, they may be reluctant to sell and buy another home at a higher rate.
Skylar Olsen, the chief economist at Zillow, notes: “Home prices in October remained in suspended animation as more buyers, but especially sellers, took a wait-and-see approach to market conditions.
Fewer home sales are the hallmark of a housing market lull, but right now potential sellers sensitive to losing their historically low mortgage rates have as much, if not more, of a reason to wait for a robust spring season and hope for mortgage rate relief.”