Housing payments rose this year for homebuyers as mortgage rate increases
and surging home prices increased the cost of homeownership. The current monthly payment on a home is $130 higher than at the beginning
of the year, driven by a interest rate increase. Fixed-rate mortgages now average about 4.5 percent, their highest level since 2011,
and this has increased the gap between the monthly mortgage payment on a median-priced home and the average monthly apartment rent to $320.
The shortage of entry-level homes for sale has been amplified by the rapid interest-rate increases. Move-up buyers have become more reluctant to sell their existing home because many homeowners locked in rates as low as 2 percent. With interest rates now as much as 250 basis points higher, purchasing power and affordability have been impacted. This is slowing activity for new home sales. Builders have been unable to construct homes at the entry-level price point because of rising construction and land costs. Home sales activity has flattened as a result.
Risk of a housing shortage could rise as residential building flattens. Multifamily developers have been setting a record pace over the past five years, but single-family home construction has remained less than half of levels prior to the Great Recession. With the strong economy and tight labor market boosting household formation, residential deliveries will likely fall short of demand.