Mortgage rates tick back up above 5%, another challenge for first-time home buyers

“Although rates continue to fluctuate, recent data suggest that the housing market is stabilizing as it transitions from the surge of activity during the pandemic to a more balanced market,” Sam Khater, the chief economist at Freddie Mac, said in a statement. 

“Declines in purchase demand continue to diminish while supply remains fairly tight across most markets,” he added. “The consequence is that house prices likely will continue to rise, but at a slower pace for the rest of the summer.”

Elevated home prices continue to be a challenge for first-time buyers who may have experienced a bout of relief when rates dipped below 5% last week.

According to a separate report from the National Association of Realtors also released Thursday, 80% of U.S. metros saw their median single-family existing home sales price increase by double digits from the previous year.

The price of a median single-family home that’s not new construction rose to $413,500, up 14.2% from the previous year.

Both rates and prices are challenging first-time buyers’ wallets.

The monthly mortgage payment on a typical existing single-family home if a family pays with a 20% down payment has jumped by $444 to $1,841, with rates rising from the first quarter to the second quarter of this year. The monthly payment is up 50% from one year ago. 

For a buyer looking at a starter home, valued typically at $351,000, with a 10% down payment loan, their monthly mortgage is $1,810. That’s up 31% from the prior quarter, and up 49% from one year ago.

A first-time buyer is spending nearly 37% of their family income on their mortgage, which is up from 28.7% the previous quarter.

“Home prices have increased at a pace that far exceeds wage gains, especially for low- and middle-income workers,” Lawrence Yun, the chief economist at NAR, said in a statement. 

The sales picture also varied across the country in the second quarter.

The NAR said that 44% of sales of single-family existing home sales came from the South in the second quarter. The region also posted the largest home price appreciation of 18.2%.

Prices also increased by 12.7% in the West, 10.1% in the Northeast, and 9.7% in the Midwest in the second quarter.

Here are the top five metro areas with the largest year-over-year gains:

1. Fayetteville-Springdale-Rogers, Ark.-Mo., with a 31.9% increase in existing-home prices

2. Lakeland-Winter Haven, Fla., at 31.4%

3. Naples-Immokalee-Marco Island, Fla., at 28.9%

4. North Port-Sarasota-Bradenton, Fla., at 28.8%

5. Myrtle Beach-Conway-North Myrtle Beach, S.C.-N.C., at 28.5%

Here are the top five most expensive markets in the U.S., courtesy of the NAR: 

1. San Jose-Sunnyvale-Santa Clara, Calif., which notched an 11.8% year-over-year gain in home prices. The median price of an existing home was $1.9 million.

2. San Francisco-Oakland-Hayward, Calif., with an 11.9% increase in home prices, median price of $1.55 million.

3. Anaheim-Santa Ana-Irvine, Calif., with a 17.2% increase in home prices, median price of $1.3 million.

4. Urban Honolulu, Hawaii, with a 17.3% increase, median price of $1.15 million.

5. San Diego-Carlsbad, Calif., with a 13.6% increase, median price of $965,900.

The yield on the 10-year Treasury note
TMUBMUSD10Y,
2.838%
fell to 2.76% in early trading on Thursday.