Taylor Morrison CEO Sheryl Palmer discusses the headwinds facing the housing market after an August decline in existing home sales on ‘The Claman Countdown’.
Housing prices are becoming more unaffordable in the US as high mortgage rates and rising home prices put ownership out of reach for millions of Americans.
That’s according to a new report released by real estate data provider ATTOM, which examined 572 U.S. counties and determined that median-priced homes in about 80% of those areas are out of reach for the average income earner. , who earns about $71,214 a year.
“The latest affordability data presents a clear challenge for homebuyers,” said Rob Barber, CEO of ATTOM. “While home prices are rising and mortgage rates remain relatively high, these factors are making homes less affordable.”
Affordability is deteriorating across the country, thanks to a second-quarter spike in both home prices and mortgage rates. Combined, the two have helped push the typical share of nationwide median wages required for major home ownership expenses to 35.1% — the highest level since 2007.
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Affordability is deteriorating across the country, thanks to a third-quarter increase in both home prices and mortgage rates. (Andrew Caballero-Reynolds/AFP via / Getty Images)
“The latter number is considered unaffordable by common lending standards, which require a debt-to-income ratio of 28%,” the report said. “It marks the highest level since 2007 and sits well above the 21% mark from the start of 2021, just before home mortgage rates start to rise from historic lows.”
Compared to historical levels, median home ownership costs in 582 of 589 counties examined during the second quarter of 2024 were less affordable than in the past. This figure is about 15 times higher than it was at the beginning of 2021.
In fact, major home ownership expenses for typical homes sold during the second quarter required an annual income of $90,598 to be considered affordable – which is more than 25% higher than the national median income.
There are several reasons to blame for the worsening affordability crisis.
An available home for sale is displayed on May 22, 2024 in Austin, Texas. (Photo by Brandon Bell/Getty Images / Getty Images)
Tall The covid-19 pandemichome prices rose at a pace not seen since the 1970s. Homebuyers — flush with stimulus money and eager for more space during the pandemic — took advantage of record-low mortgage rates and flocked to the suburbs ,
Mortgage calculator: SEE HOW MUCH HIGHER THEY COULD COST
Demand was so strong and inventory so low that at the peak of the market some buyers forgoed home inspections and appraisals or paid hundreds of thousands over asking price.
The power stopped when Federal Reserve embarked on the most aggressive campaign of raising interest rates since the 1980s as it sought to slow the economy and suppress runaway inflation. Higher interest rates helped push the average 30-year mortgage rate above 8% for the first time in years.
The housing shortage has only served to increase consumer demand, which is keeping prices uncomfortably high. (David Paul Morris/Bloomberg via / Getty Images)
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These higher mortgage rates, in turn, created a “golden handcuff” effect in the housing market. Sellers who locked in a record low mortgage rate of 3% or less during the start of the pandemic have been reluctant to sell, further limiting supply and leaving few options for eager potential buyers.
Mortgage buyer Freddie Mac said Thursday that the average rate on a 30-year loan this week fell lower to 6.86% from 6.87%. While this is down from a peak of 7.79% in the fall, it remains significantly higher than the pandemic-era low of just 3%.