Here’s one more sign of Washington’s difficult housing market: Monthly mortgage payments are on the rise.
The median monthly payment for a new mortgage in Washington hit nearly $2,800 last month, according to new data from the Mortgage Bankers Association. That’s $811 higher than the same time last year and more than $1,000 higher than in April 2019, before the pandemic, another illustration of the way struggling buyers can become locked out of home ownership.
Even as the housing market began to show signs of cooling this spring, homebuyers across the country faced higher costs.
Nationwide, the median payment hit $1,889, up $153 from March and up about $569 from last April.
The median payment was $1,374 for loans backed by the Federal Housing Administration, up $374 from last April. Those loans allow lower down payments for first-time homebuyers.
Home prices skyrocketed after the start of the pandemic, when demand for homes picked up as white-collar workers went looking for home offices, more millennials reached homebuying age, and rock-bottom interest rates made more people want to buy. At the same time, housing markets across the country faced a shortage of homes for sale.
Now, home prices remain high and mortgage interest rates are rising, amid inflation.
The average interest rate on a 30-year mortgage stands at 5.1%, according to Freddie Mac. That rate is lower than during much of the past 50 years, but up 2.15 points from this time last year.
“Mortgage payments are taking up a larger share of homebuyers’ incomes, and sky-high inflation is making it more difficult for some would-be buyers to save for a down payment or come up with the additional cash they need to afford a higher monthly payment,” said Edward Seiler, an associate vice president at the Mortgage Bankers Association, in a statement.
Throughout the Seattle area, mortgage payments are up most in the Eastside areas where home prices have exploded, such as Sammamish, Woodinville, Mill Creek and Redmond, according to separate data from Zillow.
Outlying areas in Pierce County have seen payments increase, too, such as an area just south of Puyallup where the payment is up about 53%, or $859 per month, compared to last year, according to Zillow.
Washington borrowers saw the third-highest median payment in the nation in April, behind only California and Hawaii, according to the Mortgage Bankers Association.
The Mortgage Bankers Association also compares payments and incomes to see how much of a typical person’s income is eaten up by the payments, then scores 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 data sets are calculated differently. The MBA gets mortgage information from a survey of banks and compares the costs of new mortgage payments with weekly earnings data from the U.S. Bureau of Labor Statistics.
Zillow estimates mortgage payments based on the price of a typical home in a given area, assuming a buyer has a down payment of 20% and gets a 30-year fixed-rate mortgage.
Soaring monthly costs don’t hit everyone equally.
For many Washington homebuyers, high and rising incomes help account for higher housing costs. Local tech giants Amazon and Microsoft have both said they will increase pay, with Microsoft pointing to “the impact of inflation and rising cost of living.”
But the region’s expensive housing — for renters and buyers — makes it harder for many others to stay in the area.
And, because of historical racism in housing and structural inequities, higher housing costs disproportionately affect people of color, especially Black people, who face lower homeownership rates and higher homeownership costs, and are more likely than white renters to be cost-burdened (meaning they pay more than a third of their income toward rent).
Research from the Urban Institute and MIT in 2020 found that Black homeowners pay higher mortgage rates, insurance premiums and property taxes, due in part to risk policies in the mortgage process that can disadvantage people with lower down payments and lower credit scores.
According to the MBA’s estimates, from March to April, affordability worsened by 12.1 points for Black homebuyers, 11.9 points for white buyers and 11.3 points for Hispanic buyers.
Meanwhile, median rent for a new lease on a one-bedroom apartment in Washington is $1,303, up $184 a month from last April, according to Apartment List. In Seattle, the median one-bedroom rent last month was $1,586, up $220 per month.