The housing market has been a wild ride lately, and homebuyers are feeling the pinch. Loan officers are seeing more folks with mortgage payments between $8,000 and $10,000 a month. Just a few years ago, these buyers would’ve been looking at payments of $4,000 to $5,000. For many first-time buyers, the jump has been from $2,000 to $4,000, which is a huge leap.
Throughout 2022 and 2023, many buyers were optimistic, thinking, “I’m not too worried about this payment because I know I will refinance it within a year.” But as @AdvisorJohn pointed out, that thinking has been virtually squashed. Buyers are now realizing that rates can stay high for much longer than expected.
It begs the question: Did incomes double since 2022? The answer is a resounding no. Many people are finding themselves house poor, meaning their mortgage payments are taking up a huge chunk of their income.
Mortgage rates have been on a steady climb, with the average 30-year fixed mortgage rate now around 7.13%. This is a significant increase from just a few years ago. The rise in rates has been driven by factors like inflation and economic uncertainty. Experts predict that rates will remain high for the foreseeable future, making it even tougher for new buyers to afford a home.
Incomes, unfortunately, haven’t kept pace with the rising cost of homeownership. While there has been some wage growth, it’s not enough to offset higher mortgage payments. This has left many homebuyers struggling to make ends meet, leading to concerns about the long-term sustainability of the housing market.
First-time buyers are in an especially tough spot. Many are already financially stretched thin, and the increase in mortgage payments is making it even harder for them to enter the housing market. As a result, a lot of potential homeowners are finding themselves priced out altogether.
This situation underscores the need for careful financial planning. Buyers need to be prepared for the possibility of higher mortgage payments and should explore all available options to manage their finances effectively. This includes looking into different mortgage products and considering refinancing options when rates eventually decline.
Sources:
https://x.com/NewsLambert/status/1879982965150953602
https://x.com/AdvisorJohn/status/1879998050946675187
https://www.msn.com/en-us/money/realestate/how-to-get-a-mortgage-rate-under-3-in-2025/ar-AA1xeH4A
https://www.investopedia.com/mortgage-rates-hold-at-highest-level-since-may-jan-15-2025-8775035
https://www.statista.com/statistics/1351276/wage-growth-vs-inflation-us/
https://www.ssa.gov/oact/cola/awidevelop.html
https://www.visualcapitalist.com/growth-in-real-wages-over-time-by-income-group-usa-1979-2023/
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