House hunters are facing a shocking number these days.
Pity today’s homebuyers who are looking at an average monthly mortgage payment just shy of $2,900.
The reason? The average rate for the benchmark 30-year fixed mortgage recently crossed 8% for the first time since 2000 – which, combined with stubbornly high housing prices driven by a limited supply, has pushed the average mortgage payment up by 125% since the end of 2020—when the 30-year fixed hovered around 3%.
That means the average monthly mortgage payment on a $309,200 home (the median price at the end of 2020) stood at $1,282 back then. But today, with a median home price of $394,300, buyers can expect to shell out $2,896 a month.
Bottom line: The average homebuyer in the current market can tack on more than $19,300 in additional annual mortgage costs compared to roughly three years ago.
On the plus side, most current homeowners are unlikely to feel that pain. According to data from Redfin (as of 6/14/23):
- 82.4% of existing homeowners with a mortgage have a rate below 5%.
- 62% have a rate below 4%.
- 23.5% have an interest rate below 3%.
That’s good news for overall consumer spending, which has been crucial in keeping the economy resilient despite higher interest rates. But for many, the prospect of a new home is accompanied by the need for a much fatter wallet.
For more news, information, and analysis, visit the ETF Strategist Channel.
This commentary is written by Horizon Investments’ asset management team.
Past performance is not indicative of future results.
Nothing contained herein should be construed as an offer to sell or the solicitation of an offer to buy any security. This report does not attempt to examine all the facts and circumstances that may be relevant to any company, industry, or security mentioned herein. We are not soliciting any action based on this document. It is for the general information of clients of Horizon Investments, LLC (“Horizon”). This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any analysis, advice, or recommendation in this document, clients should consider whether the security in question is suitable for their particular circumstances and, if necessary, seek professional advice. Investors may realize losses on any investments.
Reference to an index does not imply that any account will achieve returns, volatility, or other results similar to that index. An index’s composition may not reflect how a portfolio is constructed in relation to expected or achieved returns, portfolio guidelines, restrictions, sectors, correlations, concentrations, volatility or tracking error targets, all of which are subject to change. Individuals cannot invest directly in any index. Indices are unmanaged and do not have fees or expense charges, which would lower returns.
The investments recommended by Horizon Investments are not guaranteed. There can be economic times when all investments are unfavorable and depreciate in value. Clients may lose money. Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. All investing involves risk of loss, and in periods of market growth, risk mitigation strategies can be expected to lag in performance behind equity strategies that do not focus on risk mitigation.
This commentary is based on public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed herein are our opinions as of the date of this document. These opinions may not be reflected in all of our strategies. We do not intend to and will not endeavor to update the information discussed in this document. No part of this document may be (i) copied, photocopied, or duplicated in any form by any means or (ii) redistributed without Horizon’s prior written consent. Forward-looking statements cannot be guaranteed.
Other disclosure information is available at www.horizoninvestments.com. Horizon Investments and the Horizon H are registered trademarks of Horizon Investments, LLC
©2023 Horizon Investments LLC
