Mortgage interest rates are now more than double of what they were in early 2021. As a result, rising home prices have started to slow down, but not by enough to offset the increased borrowing costs caused by higher rates. Home prices rose dramatically across the U.S. during the pandemic, and now, in some parts of the country, homebuyers are feeling the pain of both high mortgage rates and expensive housing.
At the beginning of the COVID-19 pandemic, the Federal Reserve took aggressive actions to help keep the economy afloat. Mortgage interest rates began to fall steadily, and the average 30-year fixed rate reached a historic low of 2.65% in January 2021. However, inflation began climbing rapidly, and the Federal Reserve started raising interest rates in March. When gradual rate hikes weren’t enough to tamp down inflation, the Fed began moving more aggressively. In November, the average 30-year fixed rate briefly topped 7%, the highest it’s been in more than two decades.
Due to both the drive-up in home prices that began in 2020 and rising interest rates, mortgage payments have increased rapidly over the last year. The monthly mortgage payment for a median-priced home is now 66% higher than a year ago. According to data from Zillow, the national median home price increased from $318,432 to $357,544 from late November 2021 to late November 2022. At the same time, the average 30-year fixed mortgage rate went from 3.11% to 6.49%.
Both mortgage interest rates and home prices vary on a geographic basis. Additionally, some parts of the country have seen smaller declines in home prices than others. As a result, homebuyers in certain areas have been much more impacted by rising interest rates. On a regional level, the Southeast has experienced some of the largest increases in mortgage payments from last year. Out of the entire U.S., Florida homebuyers have been the most impacted by rising interest rates: mortgage payments for a median-priced home in Florida have increased by over 80% from 2021. South Carolina is close behind, with mortgage payments going up by 76%. While mortgage payments have risen dramatically across the U.S., the increase has been the smallest in Idaho and California, where mortgage payments have gone up by 52.3% and 56.3%, respectively.
To determine the locations where homebuyers are most impacted by rising interest rates, researchers at Construction Coverage analyzed the latest data from Zillow and Freddie Mac. The researchers ranked metros according to the percentage change in the monthly mortgage payment for a median-priced home from 2021 to 2022. Researchers also calculated the total change in mortgage payment from 2021 to 2022, the mortgage payment for a median-priced home, and the median home price.
The analysis found that the mortgage payment for a median-priced home in the El Centro metro area was $1,008 one year ago, but has since risen to $1,725—a year-over-year increase of 71.1%.
Here is a summary of the data for the El Centro, CA metro area:
- Percentage change in mortgage payment (YoY): +71.1%
- Total change in mortgage payment (YoY): +$717
- Mortgage payment for median-priced home (current): $1,725
- Mortgage payment for median-priced home (1 year ago): $1,008
- Median home price (current): $341,415