As costs of home ownership rise, millions of Americans have been pushed out of the housing market, according to Harvard University’s annual State of the Nation’s Housing Report released Wednesday.
At today’s home prices, a first-time buyer would have had to shell out $27,400 (7 percent of the sales price) as a down-payment in April on a median-priced home, said the report. This rules out 92 percent of renters, who only have a median of $1,500 in savings. If the downpayment is halved to 3.5 percent, the monthly mortgage payment on a median-priced home would be $2,020.
“In combination with rising prices, the recent interest rate hikes raised the minimum income needed to afford these payments from $79,600 in April 2021 to $107,600 in April 2022 – effectively pricing out some 4 million renter households with incomes in this range,” the report said.
Between December 2021 and mid-April 2022, mortgage interest rates rose by 2 percent, which is equivalent to a 27 percent jump in home prices. As prices increased along with interest rates, the income and savings required to qualify for a home loan “skyrocketed.” This presents a financial burden on middle-income and first-time buyers.- READ MORE