Rising Mortgage Rates Push Home Purchases Out of Reach for Growing Share of Buyers

Typical monthly mortgage payments are 75% higher than they were in June 2019, and that plunging affordability is limiting a once unshakeable buyer pool and reducing competition even in the nation’s most popular markets. As a result, those who can still afford to buy homes are finding easier pathways to homeownership in a less tumultuous seller’s market, Zillow reports.

A widening affordability crisis is causing steep drops in pending sales in red-hot markets like San Jose, Seattle, and Salt Lake. As demand continues to drop, home value growth is decelerating, but still remains at a historic high nationwide. Annual home value appreciation cooled to 19.8% in June from a record high of 20.9% in April, but it still remains unprecedentedly high compared with the 4.6% year-over-year growth recorded in June 2019.

Monthly price growth has slowed sharply, down from 1.6% in April to 1.2% in June (smoothed, seasonally-adjusted). Even lower raw monthly price growth of 0.8% suggests further deceleration in the near future.

Home values actually declined slightly from May to June in San Jose, Seattle, San Francisco and San Diego — all among the five most expensive major metro areas — as well as in Austin, where home values have grown the most throughout the pandemic. Annual appreciation is still robust in these metros — from 15.4% in San Francisco to 25.2% in Austin. But a sharp rise in inventory and high rates of listing price cuts all point to a marked cooldown in these top-flight markets for at least the next few months.

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