• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Editor's Pick Saving money to buy a house? Your dollar goes half as far as it did at the end of 2020
Editor's Pick

Saving money to buy a house? Your dollar goes half as far as it did at the end of 2020

by October 22, 2023
by October 22, 2023 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

A tough market for homebuyers keeps getting tougher as the combination of rising prices and climbing mortgage rates makes it even harder to afford a home, new data shows.

In spite of these challenges, people are still buying homes. About 4 million are sold every month. But to a shocking extent, rising mortgage rates and the shortage of homes for sale — which feeds rising prices and bidding wars — has weakened their financial position.

People today are borrowing significantly more money for homes at much higher interest rates than just a few years ago. Overall, a homebuyer’s dollar goes about half as far as it did at the end of 2020.

In December 2020, mortgage rates hit some of their lowest levels ever, with a 30-year fixed available for 2.68%. That was a steep drop from 3.78% a year earlier.

Today, government-backed lender Fannie Mae says the average interest rate on a 30-year fixed-rate mortgage is 7.63%.

Prices have shot up as well. The median sale price of a single-family home is above $416,000 as of the second quarter of this year, up from just under $360,000 in late 2020.

By some measures, U.S. home price indexes are at all-time highs.

Lawrence Yun, chief economist for the National Association of Realtors, said that in late 2020, the monthly mortgage payment on a typical, newly sold home was around $1,100 in principal and interest. It’s now about twice that.

The NAR calculates that a buyer today needs to make $107,232 a year to afford that median home. That calculation is based on recent rates for a buyer who makes a 20% down payment and spends 25% of their gross monthly income on housing expenses.

That’s somewhat conservative, as many people devote more than 25% of their budget to those costs. And home prices vary widely across the U.S. But it still shows how much harder it’s getting to afford a house and feel financially secure.

Real median household income was $74,580 in 2022, according to the U.S. Census Bureau.

“If you don’t make six figures, it’s going to be really tough” to afford a home in many markets, Yun told NBC News.

Figuring out affordability

Another way to measure the change: The NAR also puts out a monthly housing affordability index. A typical reading, Yun said, is 120 — meaning that a person making a median income has enough money to buy a home that’s about 20% above the median price.

That figure has fallen from almost 170 pre-Covid to a preliminary total of 91.7 in August. That’s the lowest reading since October 1985.

According to Yun, part of the problem stems from the housing bust of 2006-08, which kicked off the Great Recession and the global financial crisis. A lot of smaller homebuilders failed, the surviving builders got more conservative, and combined with rising regulatory costs, that has depressed building for a full decade.

That’s one reason there are fewer homes for sale than usual. Another is that, in many cases, people who already own their homes and are paying mortgage rates in the 3% to 4% range don’t want to sell and buy a new home at nearly 8%.

The difference between a monthly mortgage payment at 3% and one at 8% can be staggering. For a median-priced home that costs $416,000 with a 20% down payment, your monthly mortgage with 3% interest is $1,403. At 8% interest it’s $2,441.

Many people are priced out of the housing market, which has also made it more expensive to rent. But there is at least some good news there, according to Yun.

‘Thankfully, on the rental side at least, they are building apartments in many many cities,’ Yun said.

He added that there are some positive signs for homebuilders as well. Stock prices for companies like Toll Brothers and NVR — the parent company of Ryan Homes, NVHomes and Heartland Homes — have skyrocketed in the last year, meaning that investors want to give these companies cash that they can use to build more houses. That won’t solve the affordability problem on its own, but it would likely help.

This post appeared first on NBC NEWS
You Might Also Like
  • Walmart workers are getting raises
  • Dow rises 200 points to close at a record
  • Jury returns verdict in Sam Bankman-Fried fraud trial
  • Southwest Airlines pauses corporate hiring, most summer internships to cut costs
Share
0
FacebookTwitterPinterestWhatsapp

previous post
China increasing nuclear arsenal at exponential rate, expected to double by 2030, Pentagon report says
next post
DeSantis says he would cancel student visas, deport foreign nationals celebrating Hamas if elected president

You may also like

Roomba-maker iRobot announces it’s laying off 31% of employees after...

January 30, 2024

TGI Fridays-branded chicken bites sold at grocery stores nationwide recalled...

December 21, 2023

Thousands of SVB staffers to receive $25 million in payroll...

May 3, 2023

Macy’s turnaround hinges on revamping some stores and closing others....

March 7, 2025

What the National Association of Realtors’ settlement means for consumers...

March 17, 2024

Paramount brands to lay off 25% of U.S. staff as...

May 12, 2023

Here’s who might testify in Sam Bankman-Fried’s fraud trial

October 5, 2023

Southwest to get rid of open seating, offer extra legroom...

July 26, 2024

Russian oligarch’s yacht is costing U.S. taxpayers close to $1...

March 7, 2024

Americans are feeling optimistic about the economy again, with some...

January 21, 2024

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Breakouts, Momentum & Moving Averages: 10 Must-See Stock Charts Right Now

      May 31, 2025
    • Leadership Rotation Could Confirm Corrective Phase

      May 30, 2025
    • Run Your Stock Portfolio Like a Pro Sports Team

      May 30, 2025
    • U.S. foreign tax bill sends jitters across Wall Street

      May 30, 2025
    • Amazon taps Xbox co-founder to lead new team developing ‘breakthrough’ consumer products

      May 30, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,765 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,472 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,451 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,432 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,308 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,106)
    • Investing (538)
    • Stock (2,581)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Breakouts, Momentum & Moving Averages: 10 Must-See Stock Charts Right...

      May 31, 2025
    • Leadership Rotation Could Confirm Corrective Phase

      May 30, 2025
    • Run Your Stock Portfolio Like a Pro Sports Team

      May 30, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,106)
    • Investing (538)
    • Stock (2,581)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    Inflation cooled to 5% in March,...

    April 13, 2023

    Some TurboTax users will soon be...

    May 8, 2023

    Starbucks poaches Nordstrom CFO as executive...

    March 4, 2025
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here