'Basic Homeownership' Now Costs a Third of Your Paycheck

Home prices are rising along with mortgage rates, pricing out potential buyers: ATTOM
By Arden Dier,  Newser Staff
Posted Oct 2, 2023 8:38 AM CDT
'Basic Homeownership' Costs a Third of Average Pay
A couple reviews their finances.   (Getty Images/doble-d)

"Home ownership keeps getting tougher," according to real estate data provider ATTOM, which finds the average American can't afford to buy a home in communities across the country. In a new report, researchers examined median 2022 home prices in 575 US counties and found 99% of prices were beyond the reach of the average income earner making $71,214 per year, per CBS News. ATTOM considers an "unaffordable" home as one in which a person must set aside more than 28% of their annual income to cover major costs, including the mortgage payment, insurance, and property taxes. As it stands today, the typical home costs 34.6% of the average annual wage, the highest since 2007, per Insider.

A major reason is that mortgage rates hit "their highest level in nearly 23 years" last week, per CNN. A 30-year fixed-rate mortgage averaged 7.31%, up from 7.19% the previous week. That's compared to 6.70% a year ago. The increased rate adds hundreds of dollars to a house payment each month. But there's another, related factor: House prices are also climbing as most homeowners locked into lower mortgage rates are holding on to their properties rather than making a new purchase at the higher rate, resulting in fewer properties on offer. Homes will only become more unaffordable as mortgage rates climb further and "revised economic projections show that another rate hike this year is definitely on the table," Danielle Hale, chief economist at Realtor.com, tells CNN.

"But with basic homeownership now soaking up more than a third of average pay, the stage is set for some potential buyers to be priced out, which would reduce demand and the upward pressure on prices," says ATTOM CEO Rob Barber, per Insider. As of now, Los Angeles, Chicago, Phoenix, San Diego, and Orange County, California, are among the communities with the most unaffordable homes as it relates to the average salaries of residents, while communities in the vicinity of Cleveland, Detroit, Houston, Philadelphia, and Pittsburgh have the most affordable homes, according to the ATTOM report. The national median home price sat at $407,100 in August, up 3.9% from a year previously, per CBS. (More homeownership stories.)

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