Homebuyers hoping for better deals as prices drop are getting slammed as average payments just hit a record high

• In April, home prices posted the biggest annual decline in more than a decade, according to Redfin.

• But homebuyers' monthly mortgage payments still soared to a new all-time high.

US home prices just posted the biggest annual decline in more than a decade, but that's not making homeownership any more affordable.

Indeed, a report from Redfin shows that the median home-sale price fell 2.6% year-over-year during the four weeks ending April 16 — the biggest decline in over ten years and a possible break for Americans discouraged by the cost of housing. However, there's no such luck: as home prices retreated, the typical US homebuyer's monthly mortgage payment soared to $2,538, a new all-time high.

While US mortgage interest rates steadily declined throughout March and early April, they increased last week amid growing speculation that the Federal Reserve will again boost its benchmark interest rate in May. Expectations for a pause in Fed rate hikes have subsided as fears of a banking crisis ebbed.

With the 30-year-fixed mortgage rate at 6.39% as of April 20 — up from 5.11% during the same time period in April 2022 — any affordability advantage that homebuyers may have hoped to gain as a result of sliding home prices has been fleeting.

"Homebuyers are window shopping and many are entering the store, but few of them are making it to the cash register yet," Taylor Marr, the deputy chief economist at Redfin, said in the report. Many buyers are turned off by higher rates, he said.

Forecasts that home prices will fall further in 2023 may do little to encourage buyers to return to the market. Elevated borrowing costs coupled with the lofty prices – especially in popular pandemic Zoom towns like Austin, Texas, and Phoenix — will likely keep many buyers on the sidelines.

It is a situation that could worsen as the supply of homes available for sale remains lackluster.

"There's not much on the shelves to choose from," Marr said.

In 2022, the gap between single-family-home constructions and the number of households formed climbed to 6.5 million homes, according to Realtor.com. Data from the National Association of Realtors shows that as of January, existing inventory stood at a 2.9-month supply, well below the 5 to 6 months of inventory that experts recommend for a healthy real-estate market.

Higher mortgage rates are freezing current homeowners, too. In April, new listings are down 21% as homeowners who've locked-in mortgages at sub-4% rates refuse to move, because they'd have to swap their loans for ones with higher monthly payments, according to Redfin.

"The good news is that people who already own homes have locked in relatively low mortgage payments," Marr said in a September housing report. "The bad news is that homeownership is moving further out of reach for other folks as rising rates, elevated home prices and the persisting housing shortage make buying a house more expensive."