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American Mortgage Payment Costs Are Now 36% Higher Than a Year Ago

By Claire Ballentine

Finding a home to buy is only the first struggle. Then there’s paying the mortgage.

That’s become increasingly challenging, with the average American monthly mortgage payment rising to the highest level ever. It’s now $1,230 per month for a 30-year, fixed-rate loan, according to data from home-listing site Zillow. That’s up 36% from the average of $905 a year ago and a 6% increase from January.

The Logan Circle neighborhood is seen in this aerial photograph taken above Washington, D.C., U.S., on Tuesday, Nov. 4, 2019. Democrats and Republicans are at odds over whether to provide new funding for Trump’s signature border wall, as well as the duration of a stopgap measure. Some lawmakers proposed delaying spending decisions by a few weeks, while others advocated for a funding bill to last though February or March.

Mortgage rates in the U.S. have risen in recent months, although the past two weeks have seen slight declines. With higher rates expected as the Federal Reserve prepares to hike its benchmark lending rate in response to inflation, the increase is further squeezing homebuyers grappling with an unyieldingly pricey real-estate market. Zillow describes it as a “one-two punch.”

In the past year, the typical U.S. home increased almost 20% in value, from about $272,000 to $326,000. Although mortgage rates only inched higher for most of 2021, that uptick combined with rapid home-price appreciation to push the average monthly mortgage payment to a record high. 

That estimate assumes the homebuyer is making a 20% down payment on their house, and taking out a mortgage for the remainder. But in fact, almost 60% of buyers last year who purchased their home using a mortgage put down less than that, according to Zillow data. 

The yearly increase in mortgage payments in January — the latest month for which data is available — was highest in Austin, Texas, at almost 60%, followed by Raleigh, North Carolina, and Phoenix. Even the cities with the least change — Baltimore, Washington, D.C., and Milwaukee — all experienced hikes of more than 20%.

There’s evidence some buyers are getting discouraged. A gauge of U.S. home-loan applications recently fell to the lowest level since 2019, and  sales of new single-family homes in the U.S. have declined for three months in a row.  That drop in demand could theoretically help cool the real estate market.

But Zillow economist Jeff Tucker still predicts houses for sale will be snapped up quickly.

“With so few homes on the market, sellers still may expect multiple offers on their listings, even if a substantial share of buyers press ‘pause’ on their home search for now,” he wrote in a recent report. 

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