The Same House Costs $264 More a Month Than It Did a Year Ago

7.40% for a Second Straight Week

Freddie Mac's weekly survey had the 30-year fixed at 7.40% this week, unchanged from last week and the highest level in nearly three years. A flat week sounds harmless. Compare it to this time last year, when the same survey sat at 6.27%, and the picture changes.

On a $350,000 loan, principal and interest at 6.27% comes to about $2,160 a month. At 7.40%, it's about $2,423. That's $264 more every month for the same house at the same price. On a $300,000 loan the gap is about $226. On $400,000, about $301. Taxes and insurance sit on top of all of that.

Higher Rates Are Splitting Buyers in Two

CNN reported this week that high rates are deepening what economists call a K-shaped housing market. Buyers at the higher end keep buying. First-time and entry-level buyers take the hardest hit. That lines up with what I see with clients. Someone selling a home with equity can put more down and absorb a higher rate. A first-time buyer who barely qualified last fall may not qualify for the same loan today on the same income.

How That Plays Out Across SE Michigan

Typical home values in the four counties I work in range from about $171,000 in Wayne County to about $433,000 in Washtenaw County, per the Zillow Home Value Index. The rate is the same for everyone, but the dollar hit scales with the loan. At lower price points the increase is smaller in dollars and easier to absorb. For a first-time buyer stretching toward $400,000, an extra $300 a month can decide whether the loan gets approved at all.

Plan Around the Payment

If this would be your first home, get pre-approved using today's rate and build your search around the monthly payment you can comfortably carry, which is often lower than the maximum a lender will approve. Ask your lender about a rate buydown and whether a seller credit could help pay for it. With more sellers cutting prices this fall, that request is reasonable.

If you already own and want to move up, your equity is doing a lot of the heavy lifting. Run your sale and your next purchase as one set of numbers, because a bigger down payment shrinks how much the rate costs you. And if you're holding off until rates drop, put a number on what waiting costs you, because nobody can tell you when that drop will come.