And while there are some signs of cooling in the market, it doesn’t look like there will be much relief in sight for home buyers.
A year ago, a buyer who put 20% down on a median priced $363,800 single family home and financed the rest with a mortgage rate of 2.88% — the average at the time — had a monthly payment of $1,208.
Over the past five years, the average home price has gone up by 60% while the average income has risen by less than 15%, said Andy Walden, vice president of enterprise research at Black Knight, a mortgage database company.
“Home prices are significantly out of whack with income levels,” said Walden.
Americans are now spending more than 35% of their median income on monthly principal and interest payments for that newly purchased median-priced home. Historically, Americans spent closer to 25% of median income on payments.
To get back to that level, Walden said, some combination of these things would need to happen: a person’s income would need to grow by 40%, mortgage rates would need to be cut in half, or there would need to be a 30% drop in the median price of a house.
But none of those things are likely to happen any time soon.
How did we get here?
Now buyers are grappling with a combination of high home prices and rising mortgage rates.
“The pain point came when rates returned to their 6% level,” Walden said.
The other side of the issue is supply. Eager buyers were met with a national shortage of homes that has been a long time in the making, creating a supply and demand mismatch that…
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