Future homebuyers face historically challenging market conditions as skyrocketing home prices combined with high mortgage payments put significant pressure on budgets.
According to the latest data, the median cost of existing single-family homes in the second quarter jumped 14.2% year-over-year to $413,500. National Real Estate AssociationThe median exceeded $400,000 for the first time in the organization’s data tracking record.
“House prices are rising far faster than wages, especially for low- and middle-income workers,” said NAR chief economist Lawrence Yun.
According to the NAR, the affordability of single-family homes has “dropped dramatically” over the past three months as mortgage rates soared. Mortgage rates have risen steadily this year on expectations of tightening financial conditions as the Federal Reserve raised interest rates to combat inflation.
Data show that first-time homebuyers spent a whopping 36.8% of their family income on monthly mortgage payments in the second quarter. This figure was up from her 28.7% just one quarter ago.
“A mortgage is considered unaffordable if the monthly payments (principal and interest) exceed 25% of the family’s income,” the NAR said in a release.
Across 53 markets nationwide, families needed an annual income of at least $100,000 to pay a 10% down payment on a home in the second quarter. This is down from 27 markets in Q1.
Mortgage rates have shown volatility amid growing fears that a sharp Fed rate hike could trigger a US recession.Main long-term mortgage Interest rates are now over 5% A week, according to Freddie Mac.
Many economists warn that the U.S. housing market will see a sharp correction in prices in the coming months as a surge in mortgages reduces demand from would-be buyers.
Last month, Pantheon Macroeconomics chief economist Ian Shepardson said prices were “Surging” Demand with a “Major” Plunge – Especially in overheated markets.
Shepardson warns that housing is likely to be “about 15-20% overvalued” relative to income.
“The market is adapting to the new reality of much lower volumes and much higher inventories. .