Published by REALTOR.com | November 2, 2023
With mortgage interest rates hitting record highs not seen in decades and quickly approaching 8%, many might wonder: How much more does it actually cost to buy a house today?
According to a new report by Realtor.com®, the monthly cost of financing 80% of a typical home jumped by $166 in October compared with this same month last year.
That’s “a new record, on top of what was already the highest amount since Realtor.com began tracking this data in mid-2016,” says Realtor.com Chief Economist Danielle Hale.
Do the math, and this means that today’s homebuyers must cough up $2,405 per month for the privilege of owning a house. And in order to comfortably afford those mortgage payments, a homebuyer would need an annual salary of $119,500—nearly double the actual median household income of $64,240.
In other words, the typical American makes only about half as much as they need to afford a home today.
Sky-high mortgage rates aren’t the only metric keeping real estate in a prolonged affordability crunch.
Despite high mortgage rates, home prices aren’t budging much, with the median list price in October hovering at $425,000. That number has remained more or less stable compared with this same time last year.
“Listing prices have been buoyed by scarce inventory,” says Hale.
The one upside for buyers is that home prices are declining seasonally, down from $430,000 in September. They’re also down from their all-time high of $450,000, in June 2022.
The overall number of homes for sale in the U.S. sank by 2% in October compared with this same month last year. That percentage might not seem dramatic at first glance, but this scarcity of listings is downright shocking when compared with pre-COVID-19 levels from 2017 to 2019, which boasted 42.4% more homes for sale.
As for fresh listings, those were also down by 3.2% in October, compared with last year.
A growing number of buyers are turning to purchasing new construction.
“New-home sales have been increasing,” says Hale. However, “construction activity isn’t elevated enough to fully bridge the low inventory gap.”
So, when can buyers expect to see a substantial increase in new listings and active inventory overall?