Monthly housing payments hit a new record high this week as mortgage rates jumped, pricing out many homebuyers, especially those with limited budgets. But Redfin agents report that many serious buyers are used to high rates and remain in the market.
Housing payments hit a new high this week as mortgage rates jumped due to progress on a possible debt-ceiling deal. Daily average rates hit 7.12% on May 25, reaching their highest level since early November. The typical U.S. homebuyer’s monthly mortgage payment hit a record-high $2,614 at a 6.57% mortgage rate, the current weekly average.
The rate increase dampened homebuying demand. Pending home sales dropped 17.4% nationwide from a year earlier during the four weeks ending May 21, the second-biggest dip since January (the biggest was a 17.5% decline in early April). Mortgage-purchase applications declined, too, dropping 4% from the week before.
Potential sellers continued backing off, with new listings of homes for sale dropping 24%, one of the biggest declines since May 2020. That’s because homeowners continue to hang onto their homes, locked in by comparatively low rates. Even though demand is down, it’s still outpacing supply as the new-listing drought has caused the total number of homes for sale to post an annual decline (-0.9% YoY) for the first time in nearly a year.
Despite rates jumping past 7% and a lack of new listings, many early-stage homebuyers remain committed. Redfin’s Homebuyer Demand Index, which measures requests for tours and other services from Redfin agents, increased from a week earlier and is essentially flat (-1%) from a year earlier. Some of these house hunters are likely to continue moving forward, while others may wait for rates to decline before securing loans. We may see a burst of pent-up demand when and if rates dip again.
“People may be wondering why rates are surging as we come up against a potential debt crisis. Right now, the way investors are reacting is 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,” said Redfin Economics Research Lead Chen Zhao. “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. 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.”
In the Seattle area, different buyers are reacting differently to mortgage rates surpassing 7%. Redfin Premier agent Hal Bennett, who works with buyers and sellers in pricey eastside suburbs like Bellevue and Sammamish, said buyers are shying away this week as rates tick past the 7% mark. But Bliss Ong, a Redfin Premier agent who works mainly in the city of Seattle, says the 7% number doesn’t present the same psychological barrier for her buyers that it did back in fall 2022.
“Rates hitting 7% is pushing some homebuyers entirely out of the market, especially those with lower budgets. But others are just pushing their price range down,” Ong said. “The 7% number isn’t scaring away buyers as much as it did back in the fall. The housing market is different now because buyers are used to rates in the 6% range, and some of them are even motivated to secure a loan now in case rates rise further.”
Jacksonville, FL Redfin Premier agent Heather Kruayai reports that in her area, it’s the most expensive homes that are most popular in today’s market. “Affordable listings are getting stale, but expensive ones are selling quickly. That’s usually because those buyers can lessen the impact of high rates by making huge down payments or paying in all cash,” Kruayai said. “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.”
Unless otherwise noted, the data in this report covers the four-week period ending May 21. Redfin’s weekly housing market data goes back through 2015.
For bullets that include metro-level breakdowns, Redfin analyzed the 50 most populous U.S. metros. Select metros may be excluded from time to time to ensure data accuracy.
Refer to our metrics definition page for explanations of all the metrics used in this report.
