Homes becoming increasingly less affordable
If you’re in the market for a house, you know how competitive things are now. With low inventories and severe underbuilding, there aren’t a lot of options, and you’re almost certain to pay more than the asking price. Now, high mortgage rates are making the situation even more painful.
The 30-year fixed mortgage rate hit 5.55% on Monday, marking its highest level since the Great Financial Crisis in 2009. Buying a home is nearly the most difficult it’s ever been in the U.S. in terms of affordability, and Black Knight reports that in 95% of the country’s housing markets homes are less affordable than long-term levels.
“Affordability from a home price/down payment perspective is the worst it’s ever been, meaning extreme barriers to entry,” reads a research note from Bank of American Global Research. “Given these extraordinary supply challenges, we expect home prices to stay hot at a 10% (year-over-year) clip in 2022 despite existing home sales pulling back.”
Mortgage rates have been on the rise for the past few months, and according to experts, they are likely to continue increasing in the near future. If you’re thinking of buying a home in the near future, it’s important to start preparing now. One way to do that is by using a VA Loan Calculator to estimate your monthly payments.
Those who already own homes have seen the value of them go up to the tune of $6 trillion nationwide over the last two years, but the situation has made it much more difficult for people to become first-time homeowners and build the kind of wealth that can be passed down through generations.
Mortgage payments for new homeowners have increased by roughly 30% in the past year, while median family income rose by just 3.6%.
“A home purchase was unaffordable for a typical first-time buyer intending to purchase a typical home,” the National Association of Realtors said. “First-time buyers typically spent 25.6% of their family income on mortgage payments, making a home purchase unaffordable.”
With the Federal Reserve set to raise interest rates once more this week, borrowing will get more expensive, which is like to send to mortgage rates up once more. Another 50 basis points on mortgage rates, or a 5% rise in home prices, and we’ll see buying a home become as difficult as it’s ever been for Americans, Black Knight says.
Leave a Reply