Mortgage Payments Are Getting More and More Unaffordable


Fed Reserve of Atlanta: The median U.S. household currently would need 32.1% of its income to cover the mortgage on a median-priced home, the highest since 2008.

ATLANTA – U.S. incomes are trailing home prices, reducing affordability for many Americans. The Federal Reserve Bank of Atlanta says the median American household would need 32.1% of its income to cover mortgage payments on a median-priced home, the highest since 2008.

Skyrocketing home prices across the country are nullifying the effects of modest income growth and historically low interest rates, with prices climbing at a record pace for the fourth straight month in July due to a shortage of listed houses.

The Atlanta Fed said median home prices in July were $342,350, while median incomes were $67,031, amounting to 23% and 3% year-over-year increases, respectively.

Economists say first-time home buyers will be most impacted by the affordability decline, which will force them to agree to larger monthly payments, purchase less desirable homes, or avoid the market altogether.

“The question is whether it is an insurmountable hurdle or is it just that these households have to spend more of their monthly income on the mortgage,” notes Haus chief economist Ralph McLaughlin.

Christopher and Danielle Ferreris have been hoping to buy a Tampa-area home for nearly two years, and while they can manage about $1,600 in monthly payments, every house they have viewed requires monthly payments about 25% higher than that. The typical value of a home in Tampa was $331,000 in August, up from $265,000 in August 2020, according to Zillow.

Source: Wall Street Journal (10/03/21) McCaffrey, Orla

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