According to normal lending standards, the average American cannot afford to purchase a home in an increasing number of cities across the country, and there is no indication that things will improve any time soon.
This is the main finding of a brand-new study that ATTOM, a source of real estate data, released on Thursday. According to the survey, ATTOM researchers looked at the median home prices for 575 U.S. counties last year and discovered that 99% of those counties now have homes priced too high for the typical American, who earns about $71,214 per year.
Two trends, according to housing experts, explain why prices are still rising. This year, home loan interest rates surpassed 7%, potentially raising monthly mortgage payments by hundreds of dollars. Homeowners who secured cheaper mortgage rates during the epidemic have chosen not to sell their residence in fear of being forced to purchase another home at the current high rates.
According to Daryl Fairweather, chief economist of Redfin, “the only folks who are selling right now are people who genuinely need to relocate because of a life event — divorce, marriage, new baby, new job, etc. The dearth of fresh stock “keeps prices high.”
According to the National Association of Realtors, the median price of existing homes nationwide was $407,100, an increase of 3.9% from the previous year. According to Freddie Mac, the average interest rate for a 30-year mortgage was 7.19%, up from 6.48% at the start of 2023. As long as mortgage rates climb, prices will remain out of reach, according to Fairweather.
“The dynamics influencing the U.S. housing market appear to continuously work against everyday Americans, potentially to the point where they could start to have a significant impact on home prices,” Barber said in a statement on Thursday. As the peak 2023 buying season comes to an end, “we will see how this plays out.”
A challenge for first-time buyers
The data from ATTOM is one more piece of recent real estate research that shows how difficult it is for home buyers to purchase a property. One analyst claimed that younger millennial shoppers have a particularly difficult task.
Dan Hnatkovskyy, co-founder of new house construction firm NewHomesMate, told CBS MoneyWatch that first-time home buyers, who are frequently the most sensitive to loan rates, have had to put off their home-buying plans. “Those older buyers with more cash on hand can absorb a higher monthly payment and are still buying homes across the country,” the article states.
Why is the property market so pricey right now? Blame the baby boomers, argues one economist.
A person who has to spend more than 28% of their income on housing was deemed “unaffordable” by ATTOM. According to ATTOM, the typical home priced today would cost 35% of a person’s annual salary after taking a mortgage payment, homeowners insurance, and property taxes into account.
The co-founder of new house construction business NewHomesMate, Dan Hnatkovskyy, told CBS MoneyWatch that first-time homebuyers, who are frequently the most sensitive to loan rates, have had to put off their dream of owning a home. “Those older buyers with more cash on hand can buy down interest rates, or they can accept a higher monthly payment and are still buying homes across the country,” says the author.
Why is the property market right now so expensive? One economist says, “Blame the boomers.”
A person is considered “unaffordable” by ATTOM if they must spend more than 28% of their salary on a certain residence. The typical home today would cost 35% of someone’s annual salary after mortgage, homeowners insurance, and property taxes, according to ATTOM.