• Home
  • /
  • Home prices are sky high, but mortgages are still cheap
Home prices are sky high, but mortgages are still cheap
  • Jun 26, 2017
  • New Home Ambassador
  • mortgage cost of housing real estate prices new home ambassador builder trade in program

Real estate is crazy expensive.

The median existing home price climbed to $252,800 in May, according to the National Association of Realtors, exceeding the peak hit in June 2016 of $247,600.

At this point, home prices have been rising every month for more than five years.

While that's good news for home sellers, buyers are having a tough time finding homes they can afford.

Cities across the U.S. are facing major housing shortages, which means buyers have to compete for homes with bidding wars and offers well above asking price.

"Prices are moving up and properties are moving quickly," said Danielle Hale, NAR's managing director of housing research.

Builders aren't building enough houses to keep up with demand and current homeowners are hesitant to list their properties because they're worried they won't be able to buy a new home.

"We have tremendous demand for housing, but there is nothing available to buy, said Keith Gumbinger, vice president of HSH.com.

Making matters worse, rents have also been on the rise, which means it's harder for potential buyers to save up for a home in the first place.

But there has been one saving grace for buyers: mortgage rates.

Even though the Federal Reserve has begun raising interest rates, mortgages have been hovering below 4% recently. Last week, the average rate of a 30-year fixed mortgage ticked down to 3.90%.

"Falling mortgage rates help to soften the blow of rising home prices," said Gumbinger.

In the weeks after the presidential election, mortgage rates rose above 4% on enthusiasm for economic improvement. But as that optimism started to wane, rates fell again, Gumbinger said.

They've remained below 4% for the last five weeks.

"After the elections, there was fantastic enthusiasm we would get fiscal policy changes and the economy was going to drive forward faster," said Gumbinger. "Not a whole lot has been accomplished on that front ... and that has confused the market and dampened enthusiasm."

With the Fed raising rates, interest rates are expected to gradually rise over time, but should stay pretty low for the foreseeable future.

Gumbinger expects rates to be a little higher by the end of the year.

"We could have a 'peak week' of perhaps 4.5% between now and the end of the year, " he said.

Free Evaluation
Alarm.com

We are passionate about creating innovative technology that deepens the connection between people and the things they care about most – their homes, families and businesses. Millions of people trust Alarm.com every day for better security, advanced automation and dependable service.

Mohawk Flooring

As the world's largest flooring company, Mohawk provides unlimited style and design options from over 30 flooring categories. The extensive Mohawk family of brands covers every floor type— carpet, rugs, tile, hardwood, laminate and more— and includes highly reputable names trusted by millions

Sherwin Williams

When is red not just red? When it's Cherry Tomato, Fireworks or Habanero Chile. Browse the nine color families below and see how with over 1,500 Sherwin-Williams colors, there's something for every mood, every space and every project.

Solar City

SolarCity was started by two determined brothers with a better way to deliver clean, more affordable energy. Founded in 2006, SolarCity has since grown to become America’s largest solar provider with more than 10,000 employees. We’re just getting started.

CONTACT US