Articles

By Keith Griffith

May 8, 2024

The average family spent nearly a quarter of their income on mortgage payments during the first three months of this year, according to a new report.

The monthly mortgage payment on a typical existing single-family home with a 20% down payment was $2,037 in the first quarter, the National Association of Realtors® said in the report on Wednesday. That was down 5.7% from the fourth quarter of 2023, when mortgage rates hit their recent peak. But the average monthly payment was still up 9.3% from one year ago, an increase of $173.

Families typically spent 24.2% of their income on mortgage payments in the three months through March, down from 26.1% in the prior quarter but up 23.3% from a year ago. First-time buyers typically spent 36.5% of their family income on mortgage payments.

“We know that families are spending more to buy a home in today’s market compared with one year ago and broader historic norms,” says Realtor.com Chief Economist Danielle Hale. “As both home prices and mortgage rates have climbed, families have to choose between not buying, buying and downgrading their must-have list, or buying and putting more of their paycheck toward the purchase.”

The Realtor.com housing report for April found that 68% of the 50 largest U.S. metro areas required a household income of more than $100,000 to afford the median-priced home at current interest rates.

Rates on 30-year fixed mortgages averaged 6.75% in the first quarter of 2024, according to Freddie Mac. That was a decline from the 7.3% average during the final quarter of 2023, but up from 6.37% a year earlier. Since the quarter ended in March, rates have again climbed higher, hitting 7.22% for the week that ended May 2.

In the first quarter, the NAR report found a family needed a qualifying income of at least $100,000 to afford a 10% down payment mortgage in 40.7% of markets. That was down from 47.1% in the previous quarter, reflecting a slight uptick in affordability as interest rates eased.

“Looking at the quarterly improvement, we can see that falling mortgage rates will be able to improve the situation, but we need to see inflation get back to its 2% target before we will see sustained decline in mortgage rates,” says Hale.

Home prices continued to rise for the quarter

Despite the annual increase in rates during the first quarter, home prices rose in 93% of the metro markets tracked in the NAR report. Thirty percent of the 221 tracked metro areas experienced double-digit price gains over the same period, up from 15% in the fourth quarter of 2023.

“Astonishingly, greater than 90% of the country’s metro areas experienced home price growth despite facing the highest mortgage rates in two decades,” said NAR Chief Economist Lawrence Yun. “In the current market, rising prices are the direct result of insufficient housing supply not meeting the full demand.”

The national median price for single-family existing homes climbed 5% from a year ago, to $389,400. That was higher than the 3.4% annual price increase recorded in the prior quarter.

Home prices rose in all regions. The Northeast dominated with 11% annual price growth, while prices also rose 7.4% in the Midwest, 7.3% in the West, and 3.3% in the South.

The majority of the 10 metro areas with the fastest annual home price growth were in the Midwest and Northeast. That’s a shift from recent quarters, when cities in the South dominated the list.

Of the top 10 metro areas with the largest year-over-year median price increases, six were in Illinois and Wisconsin.

Those 10 markets were Fond du Lac, WI (23.7%); Kankakee, IL (22.0%); Rockford, IL (20.1%); Champaign-Urbana, IL (20.0%); Johnson City, TN (19.3%); Racine, WI (19.0%); Newark, NJ (18.8%); Bloomington, IL (18.5%); New York, NY (18.4%); and Cumberland, MD (18.2%).

Eight of the 10 most expensive markets in the U.S. were in California, with cities in Hawaii and Florida also making the list.

“The expensive markets in the West, where home prices declined last year, are roaring back,” Yun said. “Price dips in that region were viewed as second-chance opportunities by many buyers.”

Source: https://www.realtor.com/news/real-estate-news/average-mortgage-payments-american-income/