New Mortgage Payments Take 46.4% of Typical Income

Annual home ownership payments ate up 46.4% of median US household income in October, a record high, a clear sign of the affordability crisis plaguing the housing market.

That's according to the latest data from the home affordability tracker published by the Federal Reserve Bank of Atlanta. The tracker uses data from 2006 and calculates the median home ownership payment as a share of income. That's up from September, when homes purchased cost an average of 46.3% of household income.

But it was not only autumn – affordability. With a 10% down payment, taxes and insurance included, payments have increased rapidly since early 2021 due to rising home prices and, more recently, mortgage interest rates.

Payment is considered “affordable” if it is 30% or less of household income. For example, in February 2020, the month before the COVID-19 emergency was declared, average pay was 29% of US median income.

Since then, rising costs have put homeownership out of reach for many would-be buyers, and monthly homeownership payments were $2,682 in October — compared to $1,918 in early 2022 and $1,540 just before the pandemic.

Fortunately for home buyers, intense cost pressures have eased since October, but only slightly. According to mortgage giant Freddie Mac, the average offered rate for a 30-year fixed mortgage rose to just above 7% in mid-November and has since declined to 6.33% as of last week.

Whether the drop is enough to encourage more buyers to enter the market will be clear on Friday when the National Association of Realtors releases existing home sales data for December.

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