Home-Buying Pain Point Hits Modern-Era High

Posted October 31, 2023

The run-up in interest rates since early 2022—combined with the pandemic-era spike in home prices—has produced a historic metric, and not a good one: The average monthly payment on a traditional 30-year mortgage recently surpassed its inflation-adjusted 1982 peak of $2,372, when interest rates topped out at 17.56 percent.

Click to Enlarge Data: DQYDJ

An Ingram’s analysis of historic monthly averages for home price and mortgage rates shows that, as of this summer, those payments hit $2,477, a level not seen in the 53 years the Fed has been tracking monthly interest rates. That figure quickly receded, falling by $631 just a month later, on its way to a modern-era low of $837 a month in 2012. As recently as 2016, P&I was still under $1,000 a month, but things have changed drastically since then.

For home-buyers in Missouri and Kansas, the figures are somewhat less alarming, but still daunting: Using average home values of $282,000 in the Sunflower State and $267,000 in Missouri, those monthly payments come in at $1,700 and $1,609, based on the latest mortgage rates of 8.28 percent.

The economic recovery of the 1980s, the digital revolution of the 1990s and 2000s and various equities rallies transformed the nation’s fundamentals; as interest rates fell sharply over the past generation, consumers in relative terms had more disposable income to spend and invest, keeping the growth going until the dawn of the pandemic era in 2020.

Over the past decade, though, home prices have more than doubled from $169,553 to the current $411,000 listed by the realty professional service MLS. That, combined with the run-up in mortgage rates, has crushed home sales, even in a time of high demand from Millennials, a demographic larger in numbers than even the Baby Boom generation.