The housing market has seen an unprecedented surge over the past three years, sparking an affordability crisis across the U.S. Ultra-low interest rates during the COVID-19 era initially stimulated demand, but housing The sector has remained resilient throughout the year despite aggressive rate hikes in the past.
Although the Federal Reserve's policy easing over the past two months has lowered mortgage rates slightly, home prices remain high. This comes as mortgage demand rose to a five-week high as 30-year fixed mortgage rates fell slightly in mid-November.
“Despite the recent downward trend, current levels of mortgage rates remain unsustainable for many prospective homebuyers and current homeowners,” said Joel Kang, vice president and deputy chief economist of the Mortgage Bankers Association. “It's still tough,” he said.
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Rising house prices: becoming unaffordable at peak times
With the average home price soaring above $400,000, it's harder than ever for Americans to buy a home.
The average sales price of a U.S. home in August was approximately $420,000, reflecting a 3% increase from a year ago. That's just $12,000 below the all-time high median home price recorded in mid-2022, according to a recent report released by Redfin.
Prospective homebuyers need to earn at least $114,627 to afford the nation's median-priced home. This number is not surprising, as the median monthly mortgage payment is currently $2,866, an increase of more than 20% year-over-year and an all-time high. The average monthly mortgage payment was approximately $2,395 as of August 2022 and $1,581 as of August 2020.
To afford the average home in the U.S., prospective homeowners need an income of $114,627, an increase of 15% ($15,285) from the previous year and a 50% increase since the start of the pandemic. This reflects the rapid increase. This represents the highest annual income requirement to purchase a home.
The crisis is even worse in large cities across the country, where you need an average income of more than $200,000 to buy a home in the nation's top 10 hot spots.
slow wage growth
Wages are not rising at the same pace, creating an insolvency crisis across the country. Median household income, adjusted for inflation, was $74,580, down 2.1% from the previous year.
Data from the Federal Reserve Bank of Atlanta shows median wages in 2023 will rise only 5% from the previous year. This lags behind the 10% rise in median home prices over the same period, exacerbating the housing shortage.
“In a homebuyer's ideal world, rising mortgage rates would cause demand and home prices to fall enough to offset the higher interest payments. But that is not the case today. New listings Although prices are up slightly, inventories remain near record lows due to weak homeowner demand.Low mortgage rates are supporting prices, according to Redfin. said Chen Zhao, leader of the economic research team.
First-time homebuyers face crisis
First-time homebuyers are the most affected by deteriorating housing market conditions, as a lack of supply and high mortgage rates are driving up home prices. The surge in primary income needed to buy a home disproportionately affects these people, who are typically younger and have fewer accumulated assets.
Those planning to upsize are also in a better position, as rising home prices allow them to build wealth and cushion the blow from higher mortgage payments.
According to the Real Estate Agent Confidence Index survey, first-time home buyers accounted for 27% of total home sales in September, down 2 points from August. This is significantly lower than the median share of 40% typically held by first-time homebuyers in the past.
“The 27% figure speaks to the affordability and inventory challenges facing first-time homebuyers,” said Jessica Lautz, principal deputy economist at the National Association of Realtors.
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This article Reality Check: Owning A Home In The US Now Demands A Six-Figure Salary originally appeared on Benzinga.com
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