Buying a house is one of those operations that can interest.. everybody. That’s right; everyone needs to buy a house sooner or later in life, which is why the offer is so huge and intimidating when it comes to real estate. But unfortunately, it has become even more intimidating than before in the recent past.
According to Insider, the housing market in the US has reached its least affordable point ever, presenting serious challenges for new home buyers. Data coming from the Mortgage Bankers Association backs up the information. The Purchase Applications Payment Index (PAPI) reached a record high of 172.3, indicating declining affordability for those seeking to become borrowers. This is attributed to factors such as rising mortgage rates, increasing loan amounts, and slower income growth compared to the surge in application amounts. The national median mortgage payment rose to $2,112 back in April. The PAPI index showed the highest readings in American states such as Arizona, Florida, Idaho, Nevada, and California.
Only four “affordable” US cities
The Federal Reserve’s decision to raise interest rates led to a doubling of mortgage rates on 30-year fixed loans, surpassing 7%. Although rates have slightly declined and are currently just below 7%, there is an expectation that they may fall back into the 5% range as inventory constraints ease.
Edward Seiler, an MBA’s associate vice president for housing economics, explained as Insider quotes:
For new home buyers, this is the worst situation since the end of the Great Recession,
Current homeowners that were lucky enough to get a 2.75% interest rate in 2022 are in a great position, but for new home buyers looking to buy a first home, or those looking to move to another home, it’s a very daunting proposition.
It seems that only four out of the 25 largest cities in the US are considered “affordable:” St. Louis, Chicago, Baltimore, and Detroit. These cities have monthly mortgage payments that are less than 25% of monthly household income, as Goldman’s Housing Affordability Indices reveal.
