Home prices are falling faster than at the beginning of the Great Recession. But homebuyers can be forgiven for feeling confused: After all, the cost of owning a home has soared, with the average monthly mortgage payment 17 percent higher than a year ago.

“Even with the price declines, for a buyer it is still a very tough market,” says Lawrence Yun, chief economist of the National Association of Realtors.

While home prices and sales are down, homeowners who locked in rock-bottom mortgage rates two years ago are reluctant to move. The resulting lack of homes for sale means buyers can’t catch a break. “People are just loving their low mortgage rates, and they’re not wanting to give that up,” Yun says.

How much does a mortgage cost today?

The housing market has grown more favorable for homebuyers in a couple of important ways. Prices are softening, and the competition for homes is easing. Even so, there’s still a shortage of homes for sale. “People aren’t listing, and in turn that’s affecting the inventory,” says Shant Bonosian, executive vice president at Guaranteed Rate in Waltham, Massachusetts. “It’s definitely still a frenzy. It’s very competitive.”

Still, because mortgage rates are significantly higher than they were a year ago, the typical homebuyer — that is, one who needs a mortgage — is harder-pressed to qualify for a home loan today compared to last year.

The median existing-home price nationwide as of April 2023 was $388,800, according to the National Association of Realtors. While that’s up 36 percent from three years ago, it’s down 1.7 percent from a year ago.

The real challenge for homebuyers comes from the sharp rise in mortgage rates. As of early April 2023, the average 30-year fixed mortgage rate was 6.32 percent, a steep climb from 4.95 percent a year earlier, according to Bankrate’s national survey of lenders.

The result: A buyer in April took on a typical mortgage payment of $1,929, assuming a 20 percent down payment and a 30-year loan. That’s up 17 percent from a $1,689 payment in April 2022, and a whopping 82 percent from three years ago.

April 2020 April 2022 April 2023
Monthly payment $1,061 $1,689 $1,929
Median price $286,800 $395,500 $388,800
Mortgage rate 3.74% 4.95% 6.32%

Regional differences

Home prices vary widely across the country. In the West, the median home price in April was $578,200, translating to a mortgage payment of $2,869 on a 30-year loan with 20 percent down. In the Midwest, the median home price was just $287,300. Borrowing 80 percent of that amount means a monthly payment of $1,426.

Region Median price Monthly payment
Nationwide $375,700 $1,945
West $578,200 $2,869
Northeast $422,700 $2,098
South $357,900 $1,776
Midwest $287,300 $1,426

Tips to afford a mortgage

The housing affordability squeeze is especially tight for first-time homebuyers. Here are a few possible strategies to play the challenging housing market:

Find down payment assistance

Every state offers help for eligible first-time buyers. These programs include down payment assistance and grants. Some cities and employers also offer incentives of their own.

Dial back your goals

Your starter home might not be a meticulously maintained house or a condo in a prime location. Getting into homeownership in today’s market means making compromises about location.

Don’t sweat the down payment too much

While we based our calculations on a 20 percent down payment, that’s not necessary. Federal Housing Administration (FHA) loans allow down payments as low as 3.5 percent. Fannie Mae and Freddie Mac allow borrowers to put down as little as 3 percent. Loans backed by the U.S. Department of Veterans Affairs (VA) require nothing down. (A caveat: A lower down payment means a higher loan balance and, therefore, higher monthly payments.)

Just wait it out

Inflation is easing, and mortgage rates could reverse course.”First-time buyers should be careful about biting off more than can be chewed,” says Greg McBride, Bankrate’s chief financial analyst. “Home prices are high, mortgage rates are high and inventory is still fairly limited. Another year or two of career and income growth could mean that mortgage payments and the other costs of homeownership fit better into your monthly budget.”