Mortgage payments have not been so affordable since 2008

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Record hikes in house prices have made homeownership more affordable than at any time since the financial crisis.

According to the Federal Reserve Bank of Atlanta, median US households need 32.1% of their income to cover mortgage payments on median homes. This is the highest since November 2008, when the same expenses consume 34.2% of income.

Supercharged house prices in domestic markets offset the effects of moderately high incomes and historically low interest rates. These are usually two factors in owning a more affordable home. Due to a shortage of homes for sale, July hit a record high for the fourth consecutive month. Higher prices force buyers to take larger loans, essentially signing up to pay off more mortgages each month for years to come.

The Atlanta Fed uses a three-month average of CoreLogic Inc.’s median home prices and median household income based on census data to calculate affordability. Median home prices in July, the latest month in Atlanta’s calculations, were $ 342,350, up 23% year-over-year. Median income increased 3% to $ 67,031.

Falling prices have the biggest impact on first-time home buyers, economists say.

“It’s a lot harder for people to get through the doors of the housing market,” said Ralph McLaughlin, chief economist at House, a housing finance start-up. “The question is, is this an insurmountable barrier or do these households have to spend a large portion of their monthly income on mortgages? “

Even though the impact (the turmoil in the housing market) was the same, the dynamics of 2008 were different. Home prices are falling, and many Americans have rented more homes than they are worth. In addition, widespread unemployment has weighed on household incomes for years.

Christopher Ferreris and his wife, Daniel Ferreris, had wanted to buy a house in Tampa, Florida for almost two years. They can afford to pay around $ 1,600 per month, but each home they see requires about 25% more monthly payment.

“It looks like we’re in a wait pattern because of the difficulty,” Ferreris said.

According to Zillow, typical Tampa home values ​​ranged from $ 265,000 during the same period last year to $ 331,000 in August.

Ferreris is doing everything he can to save money, and Ferreris started buying and selling sports cards last year. He now relies on her for around $ 500 a month.

Housing became more affordable during the first months of the pandemic, according to the Atlanta Federation. Interest rates have come down. And while house prices continue to rise, they have not accelerated at this rapid rate.

However, many families then struggled to buy a house, search for more space, or move out of a crowded city after a few months of searching. The fierce competition has caused house prices to skyrocket. Affordable prices have started to drop.

Share your thoughts

Are you buying a house, selling a house, or refinancing? What is your current experience in the housing market? Join the conversation below.

In early 2021, Americans needed about 29% of their income to cover their mortgages, the Atlanta Federation estimated. It had risen to around 32% in July. The Atlanta federal government includes principal, interest, taxes, insurance, and related costs in mortgage payments.

Daryl Fairweather, chief economist at Realtor Redfin, said:

Home buyers know this. According to Fannie Mae, about 63% of consumers surveyed in August thought it was the wrong time to buy a home. This is an increase of 35% compared to the same period last year.

Write to Orla McCaffrey ([email protected])

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