Americans earning less than $100,000 annually will now struggle to afford a median-priced house, the Seattle-based real estate brokerage Redfin Corporation recently found.
According to the report, homebuyers must now earn at least $107,281 to be able to service a typical monthly mortgage payment in 2022. By comparison, Americans only required a $73,668 household income in 2021 to meet a similar threshold.
The spike represents a nearly 50 percent annual jump.
The news comes in light of the Federal Reserve’s latest attempts to curb the raising cost of living. By progressively increasing interest rates to rein in skyrocketing inflation, the Fed has now put homeownership out of reach for many Americans.
“Affordability challenges are a major reason why home sales have slowed so dramatically over the last few months,” Redfin noted.
Today, to service a 30-year fixed mortgage costs over above 7 percent to maintain Bloomberg reports.
“I think we’re going to see volumes pull back significantly…We might not see prices fall very dramatically at a national level though,” Zillow’s chief economist Skylar Olsen told The Wall Street Journal, because the inventory of homes on the market remains low.
The changes are now even showing up amongst investors who have slowed property purchases significantly this year by 30 percent compared to the same quarter last year.
Much of the housing affordability woes stretch across America’s Sun Belt. Redfin reported that 16 of the 20 urban areas that have witnessed the largest increases in income necessary to service a median mortgage were based across this region.
Florida, in particular, has seen housing prices heat up following the twin factors or rising inflation rates alongside a devastating hurricane season. North Port, a town just outside of Fort Myers, Florida witnessed nearly a 75 percent jump in the annual household income necessary to afford to service a median house.
Whereas in 2021, a resident of North Port could have gotten by with $75,659, today someone entering the housing market would need $131,535 to stay afloat.
Accordingly, Redfin found that nearly a quarter of homebuyers using their platform were shopping outside of over-priced metro areas up from nearly 18 percent prior to the pandemic.