Mortgage rates jumped this week to 7.23% from 7.09% last week, the highest monthly mortgage payment since June 1, 2001, when they were 7.24%.
From June 1991 through May 2001, mortgage interest rates averaged 7.81%. Consumers may have felt comfortable taking on a mortgage in the 7% range. However, there’s a big difference between 22 years ago and today: home prices and inventory were more in line with wages and the population then. In June 2001, there were 2.11 million existing homes on the market. In data for July 2023, there were just 1.11 existing homes in the market.
The highest interest rate in 22 years translates into a monthly payment for the typical existing single-family home of $2,246 and a $1,948 payment for a condo. New home sales are on the rise while existing-home inventory is limited. However, the sales price is about $30,000 more than the typical existing home, which means a monthly mortgage payment of $2,379 for the typical new home. Until rates come down, this will hurt buyers’ opportunities to enter the market and the willingness of sellers to make a needed move.