A year ago, the vast majority of American homebuyers despaired of the state of the real estate market. Prices had reached record highs. There were so few homes for sale that open-home queues stretched for blocks and ready-to-move-in apartments in desirable areas received dozens of offers — and sparked soul-crushing bidding wars. It can’t get any worse, can it?
Actually wrong! Fast forward a year and there’s even fewer Homes are for sale, prices have continued their upward trend and mortgage rates are skyrocketing at breakneck speed.
The result: The real The cost of home ownership — the actual payments buyers have to make each month, which consists mostly of mortgage and capital costs, plus property taxes and insurance — is skyrocketing. And this has severely reduced the purchasing power of most would-be homeowners.
someone is buying the same home will spend about 1.5 times more on their mortgage bills today than they did a year ago. To be clear, house prices alone haven’t risen nearly as much. And sellers generally don’t pocket as much extra money from bidding wars. What’s happening is that higher home prices and rising interest rates have pushed up monthly mortgage payments by about 50% only a year.
Take that increase, then add in the highest rates of inflation in 40 years — pushing up the price of gas and just about everything else — and precipitous falls in the stock and cryptocurrency markets, and many homebuyers are suffering.
It causes a paradigm shift. Most buyers have traditionally focused on a home’s sticker price (and how much more they have to offer to get it). But higher mortgage rates can significantly increase the amount homeowners pass on to their lender. For example, statewide mortgage payments are about $1,882 per month, not including property taxes or homeowners insurance. A year ago it was about $1,249.
The exact amount depends on where the buyers live.
That’s why Realtor.com® researched the growth in mortgage payments in the 15 largest metropolitan areas in the United States. In the Miami Metro, the mortgage payments are the buyers 83% higher than a year ago. (Metros include the capital and surrounding cities, suburbs, and smaller urban areas.) At the other end of the spectrum, Detroit’s mortgage payments rose by a still painful but far less devastating 19%.
“We are already comparing  to a year that was extremely competitive,” he says George Ratiu, Manager of Economic Research at Realtor.com. “For first-time buyers, this part is challenging. First-time buyers typically face much greater hurdles, from paying down payments to qualifying for mortgages, while still competing with cash buyers, investors, and existing homeowners who can bring more money to the table. ”
Monthly home payments are slipping out of the reach of more homeowners
What baffles buyers is that even in major metropolitan areas where home prices have fallen — like Los Angeles and Philadelphia — higher mortgage rates translate into higher monthly expenses. (Prices are falling slightly in a few markets in response to higher interest rates, particularly those without as many well-paying jobs to support higher prices and places that have more smaller homes for sale.)
The numbers tell the story. According to the latest data from Realtor.com, median home listing prices rose 14.2% to hit a new record high of $425,000 in April. Average mortgage rates rose 78%, rising from 2.96% in the first week of May 2021 to 5.27% in the week ended May 5 of this year. (Interest rates are for 30-year fixed-rate loans.)
“Even in markets with declining prices, interest rates alone are driving payments up so much,” says Ratiu. “What’s striking is that even more affordable cities like Atlanta, Houston, and Chicago are seeing a significant increase in the lack of affordability.”
The situation has forced many homebuyers on more modest budgets to compromise on the home of their dreams, move to less-affordable areas — or simply give up their search for the foreseeable future. Many compete with cash buyers, often investors or longtime owners, who are downsizing into smaller, less expensive homes.
Cash buyers are not, and may be, affected by rising mortgage rates helped of them as they often lead to less competition in the market and lower overall offers.
How much will the mortgage payments increase? In Miami, they’re up 83% in just one year
Miami experienced the largest increase in mortgage payments of the 15 metros on our list, up 83% in just one year. Renters didn’t have it much easier — according to the latest data from Realtor.com, those prices rose 57.2% in March compared to just a year earlier.
Demand in Miami has been fueled by foreign buyers and investors moving in during the COVID-19 pandemic, lured by the warm weather and lack of an income tax. The ability to work from home made the move possible for many buyers. Others relocated for work, as some companies, including technology and finance organizations, relocated or opened offices in the Sunshine State. And retirees and would-be retirees continued to pour into the state.
“There are a lot of buyers whose prices are low,” says a Miami-area real estate agent Daniel Maya, by Coldwell Banker Realty. “There are people who say to me, ‘Yes, I pay more rent, but I can’t find anything [to buy].”
About a third of its customers are now from out of town, down from about 10% before the pandemic. They come from places like New York City, Los Angeles, Seattle and Chicago, he says.
He has seen homes in the $1 million to $2 million range receive cash offers of $300,000 to $400,000 over the asking price.
“How can someone who gets a mortgage deal with that?” asks Maja.
Cheaper starter housing has dried up, even in the suburbs.
“People aren’t making enough to support those prices,” he continues. “Absolutely not.”
Miami wasn’t the only metro where mortgage payments have increased significantly. To arrive at our results, the Realtor.com data team calculated the median listing prices for homes in the 15 largest metro areas in April and the difference in mortgage rates from the first week of May 2021 to the first week of May this year for 30 one-year fixed-rate loans. The data came from Realtor.com and Freddie Mac.
It’s also important to note that the mortgage rates buyers receive depend on a variety of factors, including their credit rating, how much they owe, how much they borrow, how much they’re putting on the home, and so on.
How much more do homebuyers with mortgages across the country have to shell out? Well, that all depends on where you live. Let’s take a tour of America’s 15 Greatest Subways to see the ups and downs!
Increase in monthly mortgage payment: 45%
Average home list price: $712,000
Annual change in home prices: 9.6%
Increase in monthly mortgage payment: 27%
Average home list price: $950,000
Annual change in home prices: -3.9%
Increase in monthly mortgage payment: 32%
Average home list price: $350,000
Annual change in house prices: 0%
Increase in monthly mortgage payment: 55%
Average home list price: $438,000
Annual change in home prices: 17.1%
Increase in monthly mortgage payment: 47%
Average home list price: $389,000
Annual change in home prices: 11.4%
Increase in monthly mortgage payment: 26%
Average home list price: $323,000
Annual change in property prices: -5%
Increase in monthly mortgage payment: 47%
Average home list price: $562,000
Annual change in home prices: 11.3%
Increase in monthly mortgage payment: 83%
Average home list price: $578,000
Annual change in home prices: 38.3%
Increase in monthly mortgage payment: 43%
Average home list price: $411,000
Annual change in home prices: 8.2%
Increase in monthly mortgage payment: 42%
Average home list price: $754,000
Annual change in home prices: 7.9%
Increase in monthly mortgage payment: 38%
Average home list price: $1,098,000
Annual change in home prices: 4.6%
Increase in monthly mortgage payment: 19%
Average home list price: $248,000
Annual change in home prices: -9.8%
Increase in monthly mortgage payment: 61%
Average home list price: $527,000
Annual change in home prices: 22%
Increase in monthly mortgage payment: 58%
Average home list price: $800,000
Annual change in home prices: 19.5%
Increase in monthly mortgage payment: 52%
Average home list price: $414,000
Annual change in home prices: 15.1%