According to the latest CNN news “Housing Market Records Lowest Affordability Levels Since 1984”. It’s becoming increasingly hard for people to buy homes due to high prices and rising mortgage rates.
Studies reveal that the cost of a median-priced home currently requires around 41% of the monthly income of the average household. At the moment of this financial strain, inflation is at its highest level in decades. A greater portion of people’s salaries is going into housing due to the rising cost of necessities like groceries and gas.
In fact, according to Intercontinental Exchange (ICE), the company that owns the New York Stock Exchange, housing costs are at their highest point since 1984. Since the prior report, this number has increased by 0.4%, making homes the least cheap they have been in 39 years.
The percentage of income needed to cover housing costs has risen considerably over the past few decades. For the last 35 years, this number typically stayed below 25%.
Prospective homebuyers are grappling with both high mortgage rates and pricey homes. The monthly cost of buying a median-priced home has shot up by $144 in just a month, crossing the $2,500 mark for the first time. And this doesn’t even include taxes, insurance, or other fees.
Andy Walden, ICE’s vice president of enterprise research, says the situation was already serious, and the recent rise in mortgage rates has made it worse. This is making it harder for many first-time buyers to achieve the American dream of homeownership, forcing them to rent and delaying their wealth-building plans.
Factors like turbulence in the bond market and the Federal Reserve’s efforts to combat inflation have led to mortgage rates not seen since 2000. After seven weeks of consecutive increases, the 30-year fixed rate mortgage reached an average of 7.76% by early November. This is a far cry from the 3.8% rate before the COVID-19 pandemic. Emergency actions by the Fed briefly lowered mortgage rates below 2.7% in 2020 and 2021.
