Here’s another sign of Washington’s troubled real estate market: Monthly mortgage payments are rising.
The average monthly payment on a new mortgage in Washington last month reached nearly $2,800, according to new data from the Mortgage Bankers Association. That’s $811 up from the same time last year and more than $1,000 up from April 2019, before the pandemic, another example of how difficult buyers can be locked out of homeownership.
Even as the housing market showed signs of slowing this spring, homebuyers across the country faced higher costs.
Nationwide, the average payment reached $1,889, up $153 from March and up about $569 from last April.
The average payment was $1,374 for loans secured by the Federal Housing Administration, up $374 from April last year. These loans allow for lower down payments for first-time homebuyers.
Home prices skyrocketed after the pandemic began as demand for homes increased, employees sought home offices, more millennials were reaching homebuying age and rock-bottom interest rates prompted more people to buy. At the same time, housing markets across the country have faced a shortage of homes for sale.
Now house prices remain high and mortgage rates are rising in the face of inflation.
The average interest rate on a 30-year mortgage is 5.1%, according to Freddie Mac. This rate is lower than for much of the past 50 years, but 2.15 points higher than at this time last year.
“Mortgage payments take up a larger portion of homebuyers’ incomes, and skyrocketing inflation is making it harder for some potential buyers to save for a down payment or find the extra money they need to afford a higher monthly payment,” he said Edward Seiler, Associate Vice President of the Mortgage Bankers Association, in a statement.
Across the Seattle area, mortgage payments are strongest in Eastside areas where home prices have skyrocketed, such as Sammamish, Woodinville, Mill Creek and Redmond, according to separate data from Zillow.
Payments have also increased in outlying areas of Pierce County, such as an area south of Puyallup where payments are up about 53%, or $859 per month, year over year, according to Zillow.
Borrowers in Washington saw the third-highest median payment in the country in April, behind only California and Hawaii, according to the Mortgage Bankers Association.
The Mortgage Bankers Association also compares payments and income to see how much of a typical person’s income is eaten up by payments, and then ranks each state based on the ratio. The higher the number, the worse the affordability. Last month, Washington had the seventh highest score in the nation. Idaho had the highest.
The two sets of data are calculated differently. The MBA obtains mortgage information from a survey of banks and compares the cost of new mortgage payments to weekly income data from the US Bureau of Labor Statistics.
Zillow estimates mortgage payments based on the price of a typical home in a given area, assuming a buyer makes a 20% down payment and receives a 30-year fixed-rate mortgage.
Rising monthly costs do not affect everyone equally.
For many homebuyers in Washington, high and rising incomes help explain higher housing costs. Local tech giants Amazon and Microsoft have both said they will increase wages, with Microsoft citing “the impact of inflation and the rising cost of living”.
But the area’s expensive housing — for renters and buyers alike — makes it difficult for many others to stay in the area.
And because of historical housing racism and structural inequalities, higher housing costs disproportionately affect people of color, particularly blacks, who face lower homeownership rates, higher homeownership costs, and are more likely than white renters to be burdened by the costs (i.e., they pay more than a third of their income for rent).
2020 research from the Urban Institute and MIT found that black homeowners pay higher mortgage rates, insurance premiums, and property taxes, partly due to risk policies in the mortgage process that may disadvantage those with lower down payments and lower credit scores.
The MBA estimates affordability deteriorated from March to April by 12.1 points for black homebuyers, 11.9 points for white buyers and 11.3 points for Hispanic buyers.
Meanwhile, the average rent for a new lease for a one-bedroom apartment in Washington is $1,303, up $184 a month since last April, according to Apartment List. In Seattle, the average rent for a bedroom last month was $1,586, up $220 a month.