This is the most affordable housing market since 1984. And it’s getting worse


The last time the American housing market was this unaffordable, Ronald Reagan was in the White House.

It now takes approximately 41% of the median household’s monthly income to cover the principal and interest payments on a median-priced home, according to research From Intercontinental Exchange. This comes at a time when prices are rising uncomfortably after a bout of the worst inflation in a generation. Housing is eating up a bigger chunk of paychecks as gas, grocery and other loan prices soar.

Housing now accounts for the largest portion of payrolls since 1984, according to ICE, owner of the New York Stock Exchange. This represents a 0.4% increase from last month’s report, which also showed that US homes were at their lowest affordable level in 39 years.

The proportion of families’ salaries needed to pay for housing has risen in the past few decades. Over the past 35 years, this measure has averaged less than 25%.

I wanna be Homebuyers are taking a beating Through a painful combination of High mortgage rates House prices rise. The hit pushed up the principal and interest needed to buy a median-priced home by $144 over the past month alone, according to ICE. For the first time, monthly payments exceed $2,500 — and that doesn’t even include taxes, insurance or other fees.

“The situation was already bad,” Andy Walden, vice president of institutional research at ICE, said in the report, adding that the recent jump in mortgage rates made the situation worse.

This problem is pushing the American dream out of reach for some potential first-time homebuyers. They were forced to rent instead, delaying their ability to build wealth through homeownership.

The turmoil in the bond market and the Federal Reserve’s war on inflation have sent mortgage interest rates to levels not seen since 2000.

After seven consecutive weekly increases, the mortgage rate is now fixed for 30 years Decreased to an average of 7.76% the week ending Nov. 2, according to Freddie Mac.

This is miles away Pre-Covid rate 3.8% In the fall of 2019. Aided by emergency measures taken by the Federal Reserve, mortgage interest rates briefly fell below 2.7% in late 2020 and early 2021.

The higher mortgage rates, the less people can afford homes.

At today’s prices, Monthly payments On a $500,000 home it would come out to about $3,265 after a 20% discount.

That’s $1,165 more than two years ago, when mortgage rates were barely above 3%.

Despite rising borrowing costs, house prices continue to rise amid a supply crunch.

House prices in the United States In August it rose to a record highmarking the seventh straight month of increases, according to S&P CoreLogic Case-Shiller.

Naturally, this is good news for current homeowners, assuming they don’t want to move.

It’s a major reason for Americans’ net worth Increased by a record 37% Between 2019 and 2022, according to Federal Reserve data.

But some young Americans who want to buy their first homes are looking abroad.

ICE points out that the last time housing affordability was this bad, the average cost of a home was about 3.5 times median income. Today, the price-to-income ratio is much worse, at nearly six to one.

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