The average house payment is now half of a first-time buyer's income

With starter homes costing $1 million or more in over 200 metropolitan areas, and the average sale price across the country reaching $439,000 in the second quarter, Americans searching for their first home are faced with sky-high costs.

The potential average monthly housing payment was approximately $3,500 — or 49% of the median U.S. income for the first-time buyer age group, according to estimates by NerdWallet released Tuesday.

That payment includes the price of the home, an 8% down payment, the current mortgage rate, real estate taxes, homeowners insurance and PMI, or private mortgage insurance — a requirement for mortgages financed with less than 20% down, according to the personal finance company. NerdWallet also used the median household income of householders aged 25 to 44.

Mixed signals

Mortgage rates declined for the fourth-consecutive week last week, in what should have been a positive signal for homebuyers. The 30-year fixed rate mortgage dropped to 6.44% last week, its lowest level since April 2023 and down more than 80 basis points from a year ago, according to data from the Mortgage Bankers Association.

But demand for mortgages went largely unchanged. Mortgage loan application volume increased just 0.5% on a seasonally adjusted basis from one week earlier. Similarly, purchase applications rose just 1% from the week before and were 9% lower than the same week a year ago.

Even with the drop in rates, many homeowners are holding out for even lower rates before deciding to move or take the plunge to buy a home. Just 2% of homeowners surveyed by Bankrate in June said they would purchase a home this year at a mortgage rate of 6% or higher.