For millions of Americans, “someday” is starting to look like “never” as home ownership moves further and further out of reach.
Mortgage rates briefly surged past 7% this week following Moody’s downgrade of U.S. debt — a symbolic blow already translating into everyday financial strain. The average 30-year fixed mortgage now stands at 6.99%, according to Mortgage News Daily.
Sticker shock, month to month
Pair that with today’s housing prices, and the math is sobering. In March, the median existing-home price in the U.S. was $403,700, up from $393,500 in February, and up 4.8% over the same period last year, according to the National Association of Realtors.
On a $400,000 home, a 30-year mortgage at 6.99% translates to roughly $2,661 a month in principal and interest alone, and that’s before taxes, homeowners or private mortgage insurance, and maintenance. Over the course of a year, that adds up to almost $32,000, or 43% of the median U.S. household income of $75,000.
Of course, that’s also assuming one can come up with a 20% down payment, or $80,000, to get that mortgage.
First-time buyers are getting locked out
The result? Many would-be buyers are getting priced out entirely. First-time buyers in particular are struggling to enter the market, while existing homeowners are reluctant to sell and surrender low-rate mortgages they secured years ago.
It’s a double bind: Inventory remains tight, prices stay high, and borrowing continues to be expensive.
“The timing is really not ideal for prospective buyers,” MarketWatch (NWSA) quoted one economist as saying — a dry understatement for what’s shaping up to be another locked-out summer.
Meanwhile, X is filling up with “Condolences to your realtor”-style posts.
A mortgage, a mailbox: These are the classic components of the American dream, which is why they’re also the basic theme of classic movies like It’s a Wonderful Life. But with wages lagging and interest rates stubbornly elevated, that wonderful life is slipping further away.
Until borrowing costs ease, or incomes rise meaningfully, the affordability crisis is unlikely to let up.