The housing market has been a thorn in the side of Americans for a few years now. We’ve seen record-high home prices followed by new record highs and a nearly 25-year-high in mortgage rates. We will review the housing market and the whirlwind that has been mortgage prices and rates.
Analyzing the Last Few Years
Home prices started to skyrocket in 2021 but seemed to slow down in May of 2022, hitting an all-time high of $432,437 for the median sale price. Meanwhile, mortgage rates were sky-high as demand grew, and the Federal Reserve raised interest rates to slow down inflation. Mortgage rates hit their highest since 2020 at 7.79%. However, just a few months ago, in June 2024, prices started to go back up, hitting a new record high of $442,420, with mortgage rates averaging 6.86%-6.95%. With those average mortgage rates and home prices, it would not be surprising for the average mortgage payment for a new home purchase to be over $3,500.
Today, mortgage rates are 6.44% for a 30-year mortgage and 5.63% for a 15-year mortgage. Mortgage rates have trended for several weeks after the Federal Reserve’s rate cuts. According to FreddieMac, “In general, higher rates reflect the strength in the economy that is supportive of the housing market.” However, we are getting conflicting reporting, now showing that the national number of homes sold over the last year is down 4.8%, according to Redfin, and down 3.5%, according to the National Association of Realtors. The latest reporting for average sales prices is from Redfin and currently shows a $428,096 average for September, which is down from June.
Analyzing the States
When analyzing the individual states, we see vastly different stories, state-to-state. California, which has the highest median sale price of $818,300 ($390,204 over the national average), reached a high of $857,700 in May of 2024, and since then has slowly ticked down. However, the number of homes sold, 21,995, is up 1.1% year-over-year.
California, shown above, has the highest median sale price of anywhere in the U.S.
Hawaii, which has the second-highest median sale price at $786,600, is down 9.4% year-over-year, but due to the smaller market, and fewer homes available, this percentage is quite volatile. For a more consistent comparison, we go to Washington, which has the third-highest median sale price at $635,500. Over the last year, they are up 1.7% in homes sold.
The story in Iowa, which has the lowest median sale price in the U.S. at $237,300, is vastly different, as year-over-year sales are down 11.2%. Oklahoma, the second-lowest median sale price in the U.S. at $245,000, is also down a whopping 11.5% in year-over-year sales. Finally, we look at Louisiana, which has the third-lowest median sale price at $250,300, down 15.4% in homes sold year-over-year.
Prices and Rates Impacts
Because of the erratic price and interest rate increases, many looking to buy a home are struggling to find a way to budget for a new home purchase. Those selling their homes are definitely seeing an advantage of selling at high prices, but unless they plan to move to states like Oklahoma or Louisiana (which we know they aren’t), they, too, will be stuck with higher prices to purchase a new home. And with higher interest rates, many who sell their home for massive gains are still likely to pay larger monthly mortgage payments. With the new reports that home sales are at a 14-year low, we should quickly see the median prices plummet, but we will wait and see if the trend makes an impact on the market.
If you would like, we have a video analysis that covers this topic in full, which you can watch below, or on YouTube.