It is no secret that housing prices have gone up, unless you are in the market for your first home you may not realize how unfortable it is for first time home buyers.
Not since the housing bubble of 2007 has there been such a big gap between the cost of a new house and the amount a two-earner household can borrow in order to buy it, Axios’ Felix Salmon writes.
Why it matters: Homebuyers are facing a double whammy of higher prices and higher mortgage rates, which reduce the amount of money they can borrow to buy a house.
By the numbers: The average new single-family home sold for $360,000 in April 2020, according to Census Bureau data. Less than two years later, in March 2022, that number had risen by 45% to $524,000. (The median price rose 41% in the same period.)
At the same time, the mortgage available to two people making average hourly earnings has shrunk by $144,000 since August, and now stands at a relatively low $469,000 — assuming they limit their mortgage payments to no more than 28% of their combined income.
The bottom line: Houses are still affordable if you’re already in one. But market dynamics right now make it clear why new transactions are slowing dramatically.
Axios Markets
By Matt Phillips and Emily Peck · Apr 28, 2022