Even with low interest rates, mortgages are becoming unaffordable
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The median American family is finding that mortgage payments, even with low interest rates, are increasingly out of reach. According to the aforementioned study, report from the Federal Reserve Bank of Atlanta
The Atlanta Fed stated that a median-income household should spend 32.6% of their annual income to buy a house at the median price. In June 2021, the average home price rose to $340,000. This 23.8% rise was recorded from June 2020.
It is an indicator of major affordability issues: Families who spend over 30% of their monthly earnings on housing are considered to be “cost-burdened.” according to the Department of Housing and Urban DevelopmentThey can. Because so much of their income goes toward housing, they may struggle to afford adequate food and medical care.
Atlanta Fed reported that the low mortgage rates during the coronavirus pandemic was a catalyst for greater housing demand. Even though prices grew due to demandLow interest rates and a combination of modest income growthThe keeper monthly mortgage payments affordableThe Atlanta Fed predicts that 2020 will see many new buyers.
This dynamic is expected to change in 2021. According to Atlanta Fed data, the fixed 30-year mortgage rate was at an all-time low of 2.877% in August. However, this is not enough to offset the higher prices. There is an affordability barrier for buyers.
This is a particularly serious issue for first-time homebuyersThese buyers typically have less capital that other buyers. Zillow also found out that they now need to spend a minimum of $2,000 per month. year longer to save for a 20% down payment than it did just five years ago.
Unaffordability of mortgages is only one aspect of America’s housing crisis. Rent is also becoming less and less affordableFor many families all across the country.
There are less accessible markets all across the country.
Since the outbreak of the pandemic, remote working has allowed those who have higher incomes to be mobile. This has led to a surge in wealthier buyers and higher prices for housing all across the country.
It is no surprise that the most expensive places in the United States to live are found along the coasts. According to the Fed report, eight out of 10 most affordable places in the United States in June 2021 was in California. New York City and Seattle took the two other spots.
However, the pandemic led to people moving out of places they were used to living in. The greatest declines in affordability year-over-year occurred in metro areas including Boise City, Idaho; Phoenix-Mesa-Scottsdale, Arizona; and Austin-Round Rock, Texas.
The median home price in these three areas increased by more than 25%, while San Francisco home prices rose by 7%. These areas are still not as costly as Los Angeles or New York City in absolute terms but residents are increasingly being priced out of their homes.
The Atlanta Fed reported that “in most cases markets experiencing the steepest drop in affordability had an influx homebuyers from higher-cost areas over the last year.”
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