The typical homebuyer’s monthly mortgage payment has hit a new record high of $2,614, according to new data from Redfin.
That’s the average monthly expense given a 6.57% mortgage rate, the weekly average rate for a 30-year fixed mortgage in the week ending May 25, per Freddie Mac’s Primary Mortgage Market Survey. That’s up 0.18 percentage points week over week, the biggest weekly jump since February. It’s a rise that’s likely to further stifle already tempering demand: Pending home sales nationwide dropped 17.4% annually in the four weeks ending May 21, the second-largest slide seen since January.
Sellers are pumping the brakes too. New for-sale listings were down by 24%, Redfin reported — one of the largest decreases in new listings since May 2020, at the start of the COVID-19 pandemic. Inventory continues to run historically low — so much so that demand, as hampered as it is, continues to exceed supply. The total number of homes for sale is down 0.9% from the same time in 2022, the first annualized backtrack in almost a year.
Still, Redfin also noted that many buyers are still engaged in their searches. The company’s Homebuyer Demand Index, which tracks home tour requests and other services from Redfin agents, was up week over week. On a yearly basis, it’s down only 1%, its smallest annualized dip in a year.
Heather Kruayai, a Redfin Premier agent in Jacksonville, said that buyers looking for more moderately priced homes are backing off due to the rate environment, but more affluent buyers remain committed.
“Affordable listings are getting stale, but expensive ones are selling quickly,” she said. “That’s usually because those buyers can lessen the impact of high rates by making huge downpayments or paying in all cash. Other than cash buyers moving in from out of town, the only people buying and selling are the people who need to because they’re retiring or going through another major life change.”
Meanwhile, Redfin suggests that since a good number of buyers appear to still be involved in the house hunting process, many may be playing the waiting game with mortgage rates. A “burst of pent-up demand,” as Redfin called it, may be in the cards if and when rates start to trend down.
“People may be wondering why rates are surging as we come up against a potential debt crisis,” said Chen Zhao, economics research lead at Redfin. Right now, investor reactions are the driving force. Mortgage rates have increased over the past two weeks because it looks more likely that the U.S. government will avoid hitting the debt ceiling.
“That may seem counterintuitive, but optimism is driving rates up because an economic crisis would lead to the Fed lowering rates as they try to prevent a recession,” Zhao said. “Financial markets felt the risk of default was unusually high for the last month or so, which caused rates to stay lower than they otherwise would have been. Now that Democrats and Republicans have come to the negotiating table and are making some progress toward a deal, rates are going up.”