NEW YORK – Home prices have climbed 42% since 2020, as rising mortgage rates and borrowing costs are creating barriers to homeownership, a new study shows.
A recent analysis by Zillow reveals that the housing market has become increasingly inaccessible for many Americans. To comfortably afford a home, prospective buyers need to earn 80% more than they did just four years ago. Unfortunately, median incomes have increased by only 23% during the same period, exacerbating the affordability gap.
“Incomes needed to purchase a home are just much, much higher than the typical household income,” said Orphe Divounguy, chief economist at Zillow. “The increase in cost is pricing out many families that would like to get on the housing ladder.”
In 2020, a household earning $59,000 per year could afford a typical home priced at about $240,815. That income level was below the U.S. median income of $66,000 at the time, meaning that more than half of American households could purchase a home without stretching their finances too thinly.
Today, the scenario has drastically changed. To afford a median-priced home costing $342,941, buyers need an annual income of $106,000. That is $47,000 more than what was needed in 2020 and significantly higher than the current average income of $81,000.
Over the past four years, escalating home values and mortgage rates have nearly doubled the monthly mortgage payment on a typical U.S. home. According to Zillow, today’s average buyer faces a monthly mortgage payment that is 96% higher than in 2020. With a 10% down payment, that translates to an average monthly payment of $2,200.
The sharp increase can be attributed to the rise in mortgage rates, which hovered around 3.5% at the end of January 2020. This year, rates have fluctuated between 6.5% and 7%, adding more strain to prospective homebuyers’ budgets.
© Copyright 2024 News World Communications, Inc.
