The housing market’s ongoing surge is one of several factors pushing back against Americans’ abilities to afford mortgages.
The Federal Reserve Bank of Atlanta determined that a median household would need to spend 32.1 percent of its income on mortgage payments for a median-priced home. That marks the highest percentage since November 2008, according to the Wall Street Journal.
The percentage of income needed to make mortgage incomes on a median-priced home has also grown noticeably this year alone. At the beginning of the year, that mark was 29.1 percent. The Journal reported since then, it has grown at least slightly every single month, reaching 32% by July.
The agency calculates the cost of mortgage payments by compiling the principal payment, interest, taxes, insurance and other related costs that go towards payments.
Growing incomes and historically low interest rates typically boost the market for mortgages, particularly for homebuyers seeking their first home. But the record prices on the housing market have wiped out the gains in other areas, the Journal reports.
The Real Deal previously reported the national median listing price rose to a record-high $385,000 in July. American’s incomes can’t keep up, as the Journal noted they had grown only 3 percent from the previous July to a median of $67,031.
Ironically, it has become easier for buyers to actually receive mortgages in recent months. Amid the market’s explosion under pandemic-fueled competition among shoppers, Fannie Mae and Freddie Mac began accepting loans to borrowers with lower credit scores.
However, mortgage rates could soon rise. The Federal Reserve signaled late last month it was readying to cut back on its billion-dollar bond buying program and lenders have tightened standards for jumbo loans, The Real Deal previously reported.
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[WSJ] — Holden Walter-Warner