A homebuyer must earn $107,281 to afford the $2,682 monthly mortgage payment on the typical U.S. home, up 45.6% from $73,668 a year ago, according to a recent Redfin report.
Housing affordability took a “nosedive this year,” reaching all-time lows, according to Crystal Sunbury, real estate and construction senior analyst with RSM US.
Mortgage rates, which climbed steeply in recent months, eased as a result of inflation cooling more than expected in October, and were at 6.65% on Nov. 14, down from 7.25% just a week prior.
“Easing mortgage rates and home prices, which have begun correcting over the past couple of months, will help provide some relief to housing affordability,” Sunbury said.
“However, home prices remain 8.4% above prior year, while mortgage rates are over double from the same time last year.
The cost of buying a home remains elevated, with average monthly payments over 50% higher than what they were at the beginning of the year for a median priced home, which has made homes unaffordable for many Americans, she added.
“For homes to become affordable again, incomes would need to rise drastically, mortgage rates would need drop meaningfully, or home prices would need to drop significantly,” Sunbury said.
“Incomes and mortgage rates are not likely to change drastically, and while we expect to see additional market corrections to home prices over the next few months, housing inventory remains depressed in most markets, making it unlikely that prices would drop too significantly.
“Further, while builders have homes under construction that are coming into the market, we are not likely to see a large influx of existing inventory, due to most Americans having locked mortgage rates below 3%.”
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