Two years of mortgage rate volatility and steadily rising home prices have forced buyers into a waiting game amid possibly the worst housing affordability crisis seen in decades, according to Zillow. After falling to 4.99% in August, the prime mortgage rate rose to 6.02% in mid-September, tacking on hundreds of dollars in monthly payments for buyers already squeezed by record inflation.
In less than five months, a two percentage point increase in the 30-year fixed rate mortgage added $360 onto a monthly payment for the average U.S. home. As a result, a growing number of buyers are hesitant to purchase new homes, and homeowners who locked in low rates are equally hesitant to sell.
Despite faster than normal income growth too, the mortgage rate increase piled on top of pandemic-era home price appreciation to decidedly pushed national homeowner affordability – the median household income’s share of the mortgage payment, property taxes, and insurance on the typical home – from the mid-20s earlier this year into the mid-30s by May. That’s a strain on national affordability not experienced since the mid-2000s.
Advertisement
Related Stories
Market Data + Trends
Vacation and Investment Home Market Insights
A recent report finds that beach homes are the most sought-after vacation-home type, and the investment potential of a second home is an important factor in homebuyers' purchasing decisions
Affordability
How Much Income Do First-Time Buyers Need to Afford the Average Home?
The median-priced home is unaffordable in 44 of the 50 largest U.S. metro areas
Affordability
What Is the Relationship Between Urban vs. Suburban Development and Affordability?
A new paper from Harvard's Joint Center looks at whether expanding the supply of suburban housing could, in turn, help make dense urban areas more affordable