May 12, 2022 - Real Estate

Surging mortgage rates make homebuying more expensive for Philly

Illustration of a house's roof being taken off by a trend line soaring upward through the home

Illustration: Annelise Capossela/Axios

Mortgage rates surpassed 5% — the highest in more than a decade, according to data shared by Freddie Mac.

Why it matters: Low mortgage rates made buying in a sellers' market more affordable in the early stages of the pandemic.

  • Median home sale values in Philadelphia have cooled slightly in 2022. They were only up 2.3% year over year, but borrowing money is more expensive now.
  • This is after home prices soared by 14.7% at the end of 2021, compared to the year before, coupled with record low housing inventory. Already fatigued buyers could be priced out.

The big picture: Fewer people are applying for mortgages nationwide, and, Redfin found, fewer are starting online home searches compared to around a year ago.

  • Meanwhile, more sellers are reducing their prices after initially putting their homes on the market, according to Redfin's report from March.
Data: Freddie Mac, Redfin; Chart: Simran Parwani/Axios
Data: Freddie Mac, Redfin; Chart: Simran Parwani/Axios

By the numbers: A year ago, mortgage rates were at 2.97%. In late April 2022, mortgage rates were at 5.11%.

If you were to take out a $200,000, 30-year mortgage loan in April 2021, your monthly principal and interest would be around $840, according to numbers shared by Freddie Mac.

  • Your monthly payment on a $200,000, 30-year loan in April 2022 (at 5.11%) would be $1,087.
  • That's $247 more per month, $2,964 a year and $88,920 more over the life of your loan.

Between the lines: Still, high housing demand hasn't changed in this hot market, with cash buyers and low supply.

What they're saying: Carlos Masip, a real estate agent for Keller Williams Philly, tells Axios houses are still going to be overpriced because inventory remains low.

  • "If you're not a homeowner, get on it because it's not getting any cheaper," he said.
  • Masip also mentioned noticing a lot of "buyer fatigue" from aspiring homeowners who haven't been able to score a home in this highly competitive market.

What's next: Mortgage rates are expected to rise throughout the year, averaging 4.6% for 2022 and 5% for 2023, according to Freddie Mac's trend forecast.


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