High home prices make mortgages even less affordable for first-time buyers

First-time buyers are at risk of being left behind in the housing market as home prices and mortgages continue to seemingly steadily climb to new heights due to incomes not keeping up.

The housing market has heated up in the past year as median home prices have risen steadily and have not lagged far behind in higher mortgage payments, according to a study by the Federal Reserve Bank of Atlanta, a middle-income household would now need to spend more than 32% of its annual income to pay for a median-priced home that slightly dwarfs the 30% affordability benchmark used by the US government.

Homeowners have to pay nearly $ 1,800 a month to cover the mortgage, property taxes and insurance on a median-priced home, $ 300 more than at the same time last year, according to the Atlanta Fed. Meanwhile, the median home price in July was found to be $ 342,000 versus $ 279,000 just a year earlier.

These figures come at a time when the housing market is contracting and faced with rising prices and limited supply.During the COVID-19 pandemic, housing construction prices rose due to disruptions in the supply chain. supplies of building materials and a labor shortage that was exacerbated by the spread of the virus. A drop in interest rates has also lowered borrowing costs, but has further increased demand for homes.

As these issues have eased somewhat, affordability continues to dampen any enthusiasm for the housing market’s recovery, especially as income growth continues to lag behind house prices.

First-time buyers and minorities are the hardest hit by today’s market because they often lack the means to pay off a mortgage or maintain a pre-existing equity that would allow them to buy a home today.

Millennials, those born between 1981 and 1996, struggle harder than their parents and grandparents to become homeowners.Even if there is an unmet demand for homes, members of the generation are generally more pessimistic about any chance that they will ever own one and COVID-19 has further increased this sentiment.

For non-white Americans, the racial wealth gap played a role in limiting their market share, but it risks worsening should they lose their home or prices continue to rise unabated.

An estimated 45% of African Americans own homes, a decrease of 5% from a peak in 2004. White Americans, in comparison, are more.Infobarcelona.cat Brief news.

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