According to the latest data from S&P CoreLogic Case-Shiller, U.S. home price increases show no sign of waning. Another record high was reached in March, with prices rising 6.49 percent over the last year, which was another slight increase from February. With mortgage rates now sprinting past 7 percent and nearing an 8 percent rate, the question remains the same as last year—when will potential home buyers get a break?
“Broadly speaking, we’re in a difficult situation where affordability is a difficult challenge. Homeownership is still regarded as the American dream, but with mortgage rates doubling since the pandemic and the rise in home prices, that is not supportive in getting over the hurdle,” Bankrate senior economist Mark Hamrick told The Epoch Times.
For some recent homebuyers who have dived in despite the daunting numbers against them, the term “house poor” is taking on a new and overwhelming meaning.
According to Bankrate, almost half of homeowners across the country regret their purchases. One reason is the amount of gross income required to make the purchase.
According to the Cost of Housing Index released by the National Association of Home Builders (NAHB) and Wells Fargo, an average of 38 percent of a homeowner’s income is now needed to make a mortgage payment on a median-priced, new single-family home in the United States. Their financial assessment measured the median home prices, a 10 percent down payment, taxes, insurance and private mortgage insurance. Even worse, eight markets surveyed found that a typical family would have to spend more than 50 percent of their income on a median-priced existing home.
The most brutal home market for sensible income spending was San Jose, California, with 84 percent of a typical family’s income needed for a mortgage, followed by Honolulu (73 percent), Naples, Florida (71 percent), and the Californian cities of San Diego (70 percent) and San Francisco (69 percent).
“I think you’re going to have to look long and hard to find a reason to buy right now. Prices sometimes look reasonable, but you need a real reason to buy and not make a change for the sake of making a change,” said Sarah Mizell, vice president and senior financial advisor with Core Wealth Management in Houston. “The principles don’t change. If you’re making a decision that affects 99 percent of Americans, your housing cost needs to be between 25–38 percent of gross income. You might be priced out of the neighborhood you want and need to be somewhere else. The financial principles don’t change regardless of the environment,” she said to The Epoch Times.
However, with home prices and interest rates continuing to rise, NAHB chief economist Robert Diez says a lack of inventory is still one of the bigger culprits barring many from buying homes today and changes are needed.
“In a nationwide shortage of roughly 1.5 million homes, the lack of housing units is the primary cause of growing housing affordability challenges,” he said in a statement. “Policymakers at all levels of government need to enact policy changes that will allow builders to construct more homes, such as speeding up permit approval times, providing resources for skilled labor training and fixing building material supply chains.”
The NAHB has issued a 10-point housing plan the organization believes will help ease inflation and the current U.S. housing affordability crisis by removing barriers hindering the construction of new homes and apartments. Those suggestions include promoting careers in skilled trades, overturning inefficient zoning rules and alleviating roadblocks to building permits.
Things have become so difficult for cash-strapped homeowners that some must take out additional loans or dip into savings to improve their properties. Bankrate reports that nearly one out of five homeowners they surveyed said they’ve taken on new debt to pay for maintenance and other hidden homeowner costs, with 24 percent saying they’ve had to set aside money specifically for home repairs and maintenance.
In the meantime, Mr. Hamrick says those waiting for the U.S. Federal Reserve to drop interest rates may have to wait quite a while longer. “Data supports the Fed in taking interest rates down, but we need to see the information and data that supports that. While the Fed doesn’t have a direct line in controlling mortgage rates, it would be expected we’d see some small declines by the end of the year.”
According to U.S. Census Bureau statistics, some undaunted homebuyers are still taking the plunge no matter how perilous the economic environment is. The median sales price of new houses sold in April 2024 was $433,500 and the average sales price was $505,700.
Ms. Mizell says that most of the people she advises are in the 1 percent income strata, but even at that level, she advises her clients to avoid chasing a home for fear of missing out. “Some people just want to buy and sometimes it does make sense. It’s not impossible, but harder today. You may not get everything you want in a home, but you really have to think long and hard if you want shiny and big, or you end up settling for the home you actually need.”
