Monthly mortgage payment average inches up as economic uncertainty brews

The combination of elevated mortgage rates and low housing inventory is making homeownership more unaffordable for borrowers.

Housing costs grew to an average of $2,632 during the four weeks ending Sept. 10, up from $2,605 the prior reporting period, according to a recent Redfin report. 

As a result, buyers have opted to sit on the sidelines instead of purchasing a home, pushing pending sales downwards. The brokerage's data shows that sales during this time period declined across all the 50 metros it tracks. A separate report from the Mortgage Bankers Association shows that as of Sept. 8, mortgage loan volume was down a seasonally adjusted 0.8%, marking the "lowest level since 1996."

Despite elevated interest rates, which have hovered above 7% for four weeks, prices for properties have also increased due to low inventory.

The median sale price grew by more than 3% to $376,250, per the brokerage's analysis. Properties in Miami, Newark, New Jersey and Anaheim, California saw the most notable spikes in prices, while Austin, Texas, Fort Worth, Texas and Phoenix saw the largest declines.

The brokerage predicts that the Federal Reserve, in its battle to wrangle inflation, is "highly unlikely" to push interest rates upwards in late September, however a rate hike in November or December is imminent. If that's the case, mortgage rates will remain high through the end of the year further dampening buyer demand and the bottom line for most originators.

The challenging buying landscape is also impacting demand for second homes. Per another survey published by the brokerage, mortgage-rate locks for second homes dropped by 47% from pre-pandemic levels in August, compared to a 33% decline for primary homes. 

Meanwhile, mortgage-rate locks for second homes is down 19% year-over-year, bigger than the 14% annual decline for primary homes.  

Borrowers no longer find second properties appealing because of home prices, uncertain economy, lack of new listings, return-to-work mandates and the long-term rental market cooling, Redfin's report said.