Home affordability is ‘historically low' — with owners spending a whopping share of their income on the mortgage: Report
Trying to afford a home in 2024? Say goodbye to your disposable income.
First-time homebuyers are in trouble, according to a new report on the affordability gap by researchers at the JPMorganChase Institute. The findings, reported by Realtor.com, reveal that today's typical homebuyer spends 45% more of their income on mortgage payments than they did in 2019. Specifically, affordability is 'historically low.'
The report connected post-pandemic price hikes and interest rate increases to 'a rapid deterioration in housing affordability,' particularly for first-time homebuyers, who typically fall between the ages of 25 and 44.
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3 Almost half of American homeowners' disposable income is going towards their mortgages.
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3 Rapid increases in home prices and high rates have put pressure on American wallets, despite hefty wage increases.
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The report's snapshot of the five-year period between 2019 and 2024 paints a dismal picture for hopeful homebuyers. During that time, home prices surged by 50%, according to the Federal Reserve Bank of St. Louis.
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Higher prices combined with rate hikes resulted in mortgage costs nearly doubling.
The typical monthly mortgage payment increased by roughly $600 since 2019, researchers found, and not even substantial increases to American wages have helped to keep up the pace.
The bleak outlook may be contributing to buyer skittishness. For-sale housing stock is piling up this year, and the median age of first-time buyers recently reached a record high.
3 The affordability gap widened the most in less densely populated areas.
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American 24- to 44-year-olds spent 58% of their monthly incomes on their mortgages on average in 2024, according to JPMorganChase. That lump sum is in stark contrast to the 30% spent by the same age group in 2019.
The impacts of the widening affordability gap reverberated far beyond ritzy metros. Hopes of affording a home narrowed the most in suburbs, smaller metros and rural areas, according to the report.
Increased post-pandemic demand put pressure on these smaller locales, as remote work allowed buyers to seek out affordability in less dense communities. Residents of these small towns and idyllic suburbs missed out on the higher income gains enjoyed in densely populated metros, the report noted.
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