Home Affordability Dips to Lowest in Decades

House key | Image by Maria Korneeva/Getty Images

Last year, homeownership affordability in the United States dipped to its lowest level in decades amid historically high-interest rates and surging inflation.

Not since the 1980s has it been more costly to own a home in the U.S. Unaffordability has been driven not just by over two-decade high mortgage rates but by rising home prices.

The impact of high mortgage rates on monthly costs is significant. For instance, a 30-year fixed mortgage of $500,000 at the current rate of 6.88% would require monthly payments of $3,286. In contrast, the same mortgage amount at the rate of 3.05% available just over three years ago would have cost only $2,122 per month, a difference of over 35% for the same loan amount.

Making matters worse, however, is that home prices have also risen, not just rates, meaning buyers are being squeezed from both ends. In March, the median sale price in Dallas was $248,000, or more than 4% higher than in March 2023.

Of course, this is to say nothing of the other costs that impact homeowners. While monthly mortgage payments have risen, so have many other expenses. As recently reported in The Dallas Express, inflation in the U.S. rose 0.4% month-over-month in March, 0.1 percentage points higher than anticipated, and the fifth consecutive month above expectations.

Notably, non-mortgage costs, like maintenance, property taxes, utilities, and insurance, comprise over half the costs homeowners face, reported The Wall Street Journal.

Texans, in particular, face steep home insurance expenses. In fact, the Lone Star State is expected to have the fourth-highest rates in the U.S. this year, averaging $4,437 per home. This has been driven in part by the state’s susceptibility to hurricanes, tornadoes, and wildfires, like the one that devastated the Texas Panhandle.

Costs are becoming so insurmountable that nearly 20% of homeowners said they could not afford a $500 emergency repair without using a credit card, according to a February survey by Clever Real Estate, reported WSJ. Even more concerning, one in 10 homeowners surveyed by Fannie Mae in 2023 were uncertain they could cover their home insurance premiums upon their next renewal.

According to tech company Thumbtack’s 2023 fourth-quarter assessment, American homes demand an average of $6,663 yearly in maintenance costs, an over 8% jump in just 12 months, per WSJ.

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