Mortgage Rates Barely Budge, Remain Over 7% ~ $413,500 medium ~ priced house

Homebuyers are having to adapt to a new normal: Mortgage rates now exceeding 7%. According to the latest data from Freddie Mac, the average interest rate for a 30-year fixed-rate mortgage stands at 7.19% this week. This means that for a home with a median price of $413,500, the typical monthly mortgage payment would amount to $2,243, as explained by Jessica Lautz, the Deputy Chief Economist at the National Association of REALTORS®.
These higher mortgage rates are significantly impacting the real estate market. They are affecting where potential buyers can afford to purchase homes and the size of homes they can comfortably buy. Consequently, the average loan size for purchase applications has surged to $416,800, marking the highest level in six weeks, according to the Mortgage Bankers Association.
The combination of elevated mortgage rates and increasing home prices is creating a division in the housing market, which Jessica Lautz describes as a divide between “those who have” and “those who do not.” First-time buyers, as well as single and minority buyers, are finding it increasingly difficult to enter the market due to limited available funds.
In contrast, current homeowners can take advantage of the historically high equity in their homes when making new purchases. This group of buyers is driving a strong all-cash market, where the impact of higher mortgage rates is less pronounced. In August, all-cash transactions accounted for 27% of the housing market, as reported by the National Association of REALTORS®.
In summary, the current mortgage rates above 7% are reshaping the housing market by influencing affordability and creating disparities among potential buyers, with existing homeowners benefiting from their home equity in this environment.