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Home Ownership Becoming Less Affordable in the U.S.

Home Ownership Becoming Less Affordable in the U.S.

Residential News » North America Residential News Edition | By Francys Vallecillo | February 20, 2014 9:18 AM ET



Monthly home payments for homebuyers in the U.S. increased from a year ago during the fourth quarter, according to RealtyTrac.

The estimated monthly house payment for a median-priced three-bedroom home purchased in the fourth quarter of 2013 -- including mortgage, insurance, taxes, maintenance, and subtracting the estimated income tax benefit -- increased 21 percent from a year ago. 

The increase in monthly payments derives from an average 10 percent increased in median prices across the 325 counties included in the survey, as well as a 33 percent increase in the average interest rate for a 30-year fixed-rate mortgage. 

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Daren Blomquist

"A potent combination of rapidly rising home prices and the often-overlooked but significant uptick in interest rates in the second half of 2013 caused the monthly cost of owning a home using traditional financing to jump substantially in many markets over the last year," said Daren Blomquist, vice president at RealtyTrac. "The monthly cost of owning a home is still less than renting in the majority of markets, but the cost of financed homeownership is becoming dangerously disconnected with still-stagnant median incomes, driven not by shoddy underwriting practices this time around but by investors and other cash buyers who are not tethered to the typical affordability constraints."

The new report mirrors data from the National Association of Realtors, which earlier this month reported increasing home prices in 73 percent of U.S. markets during the fourth quarter as housing affordability suffered. 

The estimated monthly house payment among the 15 most populated counties analyzed by RealtyTrac increased an average of 34 percent from a year ago, making the house payments higher than the average fair market rent for a three-bedroom home in six of those 15 largest counties. 

More from the report:

  • Based on a 30-year fixed rate mortgage with an interest rate of 4.46 percent and a 20 percent down payment, the average monthly house payment across all counties for three-bedroom homes purchased in the fourth quarter of 2013 was $865, up from $714 for homes purchased in the fourth quarter of 2012 -- based on a 3.35 percent interest rate a year ago.
  • Counties with some of the biggest increases in estimated monthly house payments included Contra Costa and Sacramento counties in California (both up more than 50 percent), Wayne and Oakland counties in Michigan (both up more than 45 percent), and Clark County, Nev. (up 43 percent).
  • Across all 325 counties, the average minimum household income needed to qualify for a median-priced home in the fourth quarter of 2013 was $41,544, up from an average minimum income of $34,262 in the fourth quarter of 2012. The minimum qualifying income was based on no more than 25 percent of household income going to the monthly house payment.
  • Counties with the highest minimum qualifying incomes were San Francisco County, Calif. ($228,569), Marin County, Calif., ($177,922), San Mateo County, Calif. ($170,284), Arlington County, Va. ($158,474), Santa Clara County, Calif. ($149,389), and Hudson County, N.J. ($142,684).
  • The average minimum qualifying income to rent a three-bedroom home at fair market rents for 2014 was $43,892 across all 325 counties, up from $43,527 at fair market rents for 2013. The minimum qualifying income for rents was calculated by multiplying the annual cost of rent by three.
  • Counties with the biggest jumps in fair market rents on three-bedroom homes included Sumter County, S.C. (up 23 percent), Kenosha County, Wis. (up 21 percent), Alameda County, Calif. (up 16 percent), Contra Costa County, Calif. (up 16 percent), and Missoula County, Mont. (up 15 percent).

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