Mortgage rates may be at all-time lows, but mortgage affordability continues to worsen due to higher home prices, according to a new analysis by Point2 Homes, an online real estate marketplace.
The share of income needed to afford housing continues to rise and monthly mortgage payments are becoming a financial burden in an increasing number of cities nationwide. In 2010, homeowners in 13 large cities were paying more than 30% of their income to cover their mortgage—which most financial advisers consider cost-burdened. In 2020, that number grew to homeowners in 15 cities who are considered mortgage burdened, the Point2 study shows. The most cost-burdened cities are located on the West Coast.
Home prices are increasing faster than incomes in the majority of the nation’s largest 100 cities. That means a mortgage is taking up more of homeowners’ paychecks.
Overall, mortgage affordability worsened in 51 of the 100 largest cities, according to Point2 Homes.
For example, some of the cities that have seen their home prices rise the most over the last decade have seen their residents’ incomes lag the most. For example, in North Las Vegas, home prices have increased 75% more than personal incomes, the study reports.
On the other hand, in six cities, mortgages require less than 10% of personal incomes, the study finds. The following markets may offer consumers the best chances of becoming homeowners.
Source: “A Decade in Housing Unaffordability: Mortgage Burden Worsens in 51 of the 100 Largest U.S. Cities,” Point2 Homes (Dec. 16, 2020)