The Facts

The monthly mortgage payment on a typical home in the United States rose 31% in 2021. 31%! This is the largest climb in payments for 22 years, as we hit a combination of record high home appreciation, inflation, and the dreaded (but anticipated) rise in mortgage rates. A three pronged attack geared against the average home buyer. 

The average interest rate on a 30-year, fixed-rate mortgage rose from 2.74% to 3.45% between January 2021 and January 2022, according to Freddie Mac’s Primary Mortgage Market Survey. Over the same time, the typical U.S. home grew in value by 19.9%, according to the Zillow Home Value Index,  thanks to strong home purchase demand running up against very low inventory of home listings.

Colorado and Colorado Springs

But, let's look more into our State and local market, and not the National numbers:

Now, for those who have been following the real estate market trends, it's no surprise that monthly costs increase when the price of the asset increases. It's probably safe to say at this point the days of 2% interest rates are gone, hopefully you locked in before this increase. The FED has also announced additional rate increases to be made through the 2022 year, perhaps as an attempt to curve the appreciation rates we have been seeing recently. Either way, it all accounts for the increase in monthly payments. 

The Math

So, check this out:

This data is extrapolated directly from the Pikes Peak Multiple Listing Service, I just did the math. We also know that the average interest rate on a 30 year conventional loan was 3.05%, and the average down payment for Borrowers over 30 was 12% (under 30 was only 6%) (Freddie Mac data). 

We can therefore assume in March of 2021 the average borrower in Colorado Springs took a loan at $416,179.28 with a rate of 3.05%. The principal and interest payment on this would become $1765.86 per month. 

Now, let's apply the math to March 2022. The average loan amount becomes $474,921.92. The average interest rate for March 2022 was 4.67% on the same 30 year conventional note. That takes the monthly principal and interest payment to $2454.57. 

So there is the math...but to recap the three factors that have come together to drive month costs up are: appreciation, rates, inflation.

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