Homebuyers' average purchasing power is dwindling due to recent interest rate increases, according to new data from Zillow. Monthly costs for buyers have also grown by 15 percent.
An interest rate increase of 1 percent means an additional $1,200 annually in mortgage payments, and if home prices also increase, the amount rises. Zillow senior economist Aaron Terrazas tells CNBC that buyers and sellers are in transition while the market adjusts to higher rates, "Looking ahead, the impact of higher rates may slow the pace of home value growth, particularly in the nation's priciest markets. Buyers will face higher financing costs, but also could benefit from somewhat less frenetic competition."
The average rate on the popular 30-year fixed mortgage is almost a full percentage point higher today than it was a year ago. It recently crossed the 5 percent line. Home prices are up 6.5 percent from a year ago, according to Zillow, so looking nationally, monthly mortgage payments for the typical home are 15.4 percent higher than they were in August 2017. Two-thirds of that jump is from interest rates, one-third from higher prices.
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