The Cost of Waiting to Buy a Home
The National Association of Realtors (NAR) recently released their July edition of the Housing Affordability Index. The index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national level based on the most recent price and income data.
NAR looks at the monthly mortgage payment (principal & interest) which is determined by the median sales price and mortgage interest rate at the time. With that information, NAR calculates the income necessary for a family to qualify for that mortgage amount (based on a 25% qualifying ratio for monthly housing expense to gross monthly income and a 20% down payment).
Here is a graph of the income needed to buy a median priced home in the country over the last several years:
And the income requirement has accelerated even more dramatically this year as prices have risen:
Bottom Line
Some buyers may be waiting to save up a larger down payment. Others may be waiting for a promotion and more money. Just realize that, while you are waiting, the requirements are also changing.
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Want to know what a move would mean where you live? A local agent can show you the figure close to home.
The 1 Factor That Explains Everything Happening with Home Prices Right Now
The national average of 1.7% price growth is accurate, but it’s an average of two very different stories happening at the same time – the few areas experiencing mild declines and the overwhelming majority that are still seeing prices rise.