Home News ‘The savings and income needed to qualify for a home loan have skyrocketed’: 5 ways the housing market left buyers in the dust — and it’s not over yet

‘The savings and income needed to qualify for a home loan have skyrocketed’: 5 ways the housing market left buyers in the dust — and it’s not over yet

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The housing market has finally become breathtaking after two years of sprints. The new report analyzes how the frenzy unfolded.

A report called’State of housing in the country 2022’by Harvard Housing Research Collaborative Center reveals the surge in costs associated with owning or renting a home and how competition among buyers has intensified.

Median home price Zoom over $ 400,000Owning a home has become much more affordable for the average future buyer.

According to Realtor.com, the median national list price for active lists was $ 447,000 in May 2022, up 17.6% from last year and 35.4% from May 2020.

Buyers will have to drop more than 38% of their income to be able to afford a median home, he said. Affordable Monitor of Home Ownership in the Atlanta Fed..

According to the report, about 67 of the top 100 housing markets experienced record highs at some point last year.

House prices set new records

And given how tight the inventories are, this environment could last a bit. May, housing Only 16 days on averageAccording to the National Association of Real Estate Agents, this is the lowest number on record.

“Unlike the previous rise in credit slack and speculative buying that fueled the housing bubble, the current rise in house prices largely reflects years of construction shortages,” the report explained. ..

Supply chain constraints, labor shortages, and regulatory constraints that strangle homebuilders are all due to the slow pace of new construction.

Soaring house prices and apartment rents

Rents are no longer affordable. “The cost of both homes and rentals continues to rise,” said the Harvard report author.

Rents rose 12% nationwide in the first quarter of this year and rose in some metropolitan areas.

During the pandemic, rents fell in big cities like New York, but the rebound was rapid in the return-to-work environment. In the first quarter of 2022, rent for apartments in New York increased by 20% year-on-year.

Rents for single-family homes rose 14% in March 2022 compared to the previous month, rising even faster.

Growth in supply and demand for apartments

Demand for rental units really surged last year.

“Many temporary factors helped boost rental demand in 2021,” the report explained.

“Federal cash support, deferred student loan payments, and increased employment have boosted the incomes of many young adults enough to allow them to afford to form their own households,” the author said. ..

“Other government interventions have protected millions of lessees [who were] We are lagging behind the rent from eviction. High prices for sellers and tight supply also helped boost demand by keeping many potential buyers in rental homes, “they added.

Investor share of home purchases skyrocket

Part of the pressure in both markets comes from the increasing share of investors in the rental market.

Investors’ share of the sale of single-family homes reached 28% in the first quarter of this year, with CoreLogic data up from 19% a year ago, according to the report. Between 2017 and 2019, investors’ share of single-family home sales averaged 16%.

Investors are focusing on the South and West, according to the report. In the fourth quarter of 2021, Atlanta had the highest share of investors in home sales at 41%, followed by San Jose at 38% and Phoenix and Las Vegas at 36%.

To make matters worse, investors are targeting low-priced homes, eliminating first-time buyers.

“In September 2021, investors bought 29% of homes that were in the bottom third of the metro area’s selling price, compared to 23% of homes sold in the top third. “The report states. “Investor-owned homes are usually converted from owned homes to rented or upgraded for resale at a higher price.”

Mortgage payments are on the rise

Harvard University reports that average-priced home payments are estimated to rise by more than $ 600 a month.

In an effort to combat rising inflation, the Federal Reserve raised interest rates, which sharply pushed up mortgage rates.According to the report, the average interest rate on fixed-rate mortgages for 30 years is over 6%. Mortgage News Daily..

“As prices continue to rise with interest rates, the savings and income needed to qualify for a mortgage are skyrocketing, raising the economic hurdles for first-time and middle-income buyers,” the report said. I am.

Owning a home under today’s terms is an expensive proposal: if you are the first buyer to pay a 7% down payment for a median home, it reached $ 27,500 in April 2022. Probably, the report said.

This amount alone would “exclude 92% of lessees with a median savings of only $ 1,500,” the author added.

The minimum annual salary required to buy a steep down payment to buy a median home has increased from $ 79,600 in April 2021 to $ 107,600 in April 2022.

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