With home prices and mortgage rates soaring from last year, it’s no surprise that homes are becoming unaffordable for many prospective buyers.
The median existing-home sales price hit $416,000 in June, jumping 13.4% from a year earlier, according to the National Association of Realtors (NAR) That represents 124 straight months of year-over-year increases, the longest streak on record.
And the 30-year fixed mortgage rate averaged 5.22% in the week ended Aug. 11, up sharply from 2.87% a year ago, according to Freddie Mac.
"Home prices have increased at a pace that far exceeds wage gains, especially for low- and middle-income workers," NAR Chief Economist Lawrence Yun said in a statement.
As for affordability numbers, the monthly mortgage payment on a typical existing single-family home with a 20% down payment jumped to $1,841 in the second quarter, says the NAR.
That's an increase of $444 – or 32% – from the first quarter of this year and $612 – or 50% – from a year ago. Families typically spent 24.3% of their income on mortgage payments, up from 18.7% in the first quarter and 16.9% a year earlier.
It’s a rough time to be a first-time buyer. For a typical starter home valued at $351,500 with a 10% down payment loan, the monthly mortgage payment rose to $1,810 in the second quarter, up $433 (or 31%) from the first quarter. That’s also up $597 (or 49%) from a year earlier.
First-time buyers typically spent 36.8% of their family income on mortgage payments, up from 28.7% in the first quarter. A mortgage is considered unaffordable if the monthly payment (principal plus interest) exceeds 25% of the family's income, according to NAR.
The Silver Linings
On the bright side, with home-sales-price appreciation decelerating a bit and home sales falling, “prospective buyers are being granted a small measure of welcomed relief,” Yun said.
The median existing-home price rose 14.2% in the second quarter from a year ago. That's modestly slower than the 15.4% increase in the first quarter. Existing home sales dropped to a two-year low in June.
In addition, “the recent dips in mortgage rates will bring additional buyers to market, especially in those places where home prices are still relatively affordable and where jobs are being added," Yun said.
The Aug. 11, 30-year fixed mortgage rate of 5.22% represents a decline from 5.54% in the week ended July 21.
In other real estate news, 78% of Americans expect a housing-market crash, according to a study by Consumer Affairs, a consumer information service. And it may surprise you that 63% of those surveyed want a housing crash.
Perhaps that’s because 75% of respondents said they plan to buy a home if the market crashes. On average, they said they have $29,504 socked away to purchase one.