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‘Exacerbating inequality’: It takes an income of $107,000 to buy a typical US home — a record 22% increase from the previous year. Will affordability only get worse?
The U.S. housing market is only getting tighter as buyers with six-figure incomes snag properties while average earners are getting priced out entirely.
The median household income for homebuyers surged from $88,000 the previous year to $107,000 — the largest increase on record at 22% — according to the National Association of Realtors (NAR).
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“In a still-competitive housing market, more well-off home buyers were able to have their bids accepted by offering larger down payments and even by paying cash,” Jessica Lautz, NAR deputy chief economist and vice president of research, said in a press release.
The real median household income in the U.S. was just shy of $75,000 in 2022, according to the Census Bureau — less than three-quarters of what the NAR report indicates homebuyers need to earn these days.
Here’s what’s contributing to the affordability issue and what some analysts are forecasting for the housing market next year.
More Americans are getting pushed out
It’s becoming increasingly difficult for prospective buyers to step into real estate, with mortgage rates stretching above 7% and market listings being squeezed by greater demand than supply.
Some wealthy buyers are sidestepping the issue of higher mortgage rates by paying in all cash, while others are making bigger down payments to get better terms on their loan. There are also those who are getting their parents to pitch in to help them with their down payment.
The housing affordability issue could also be widening the wealth gap as well — with homeowners who bought when mortgage rates were low, or prior to the COVID-19 pandemic, building wealth through rising equity from their properties, while others are uncertain they will ever be able to purchase a home.
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“High mortgage rates are exacerbating inequality between people who own homes and people who don’t,” Redfin senior economist Sheharyar Bokhari said in a recent report.
“Home prices are roughly 40% higher now than before the pandemic homebuying boom, and soaring mortgage rates have made the divide even bigger by adding more to monthly payments.”
Read more: Super-rich Americans are snatching up prime real estate abroad as US housing slumps — but here’s a sharp way to invest without having to move overseas
Some folks are sticking to renting instead of pursuing homeownership, despite rent prices surging over the years as well.
Rental platform Zumper’s national rent report reveals the national median price for a one-bedroom rental will cost around $1,500 each month, while you’ll need to cough up over $1,850 for a two-bedroom abode.
Meanwhile, the median monthly mortgage payment across the U.S. is around $2,750 a month at a 7.76% interest rate, according to Redfin.
Will affordability worsen in 2024?
Several housing firms are forecasting home prices will continue to climb in 2024, possibly requiring even higher incomes to afford them.
In July, the NAR predicted home prices would rise by 2.6% in 2024, while Zillow researchers recently projected a price increase of just over 2% from September 2023 through September 2024.
Goldman Sachs also expects prices to grow by around 2% — and forecasts mortgage rates will remain over 7% as well.
Goldman analysts point to “historically low” inventory, while saying new listings are being added at the most sluggish pace on record. Sellers are reluctant to list their current homes and relinquish their low mortgage rates, further contributing to this issue.
“This ‘lock-in’ effect is projected to depress sales of existing homes to 3.8 million in 2024, the lowest level since the early 1990s,” the report said.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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This article was originally published by a finance.yahoo.com . Read the Original article here. .