Middle-class families can afford homes worth half as much as they could three years ago, new data shows.
The median family’s purchasing power has plummeted to $356,273 as of August, down from $689,091 in the summer of 2020.
This is despite it having soared to a high of $737,392 in December 2020, figures from government-backed lender Fannie Mae show.
It comes despite a recent report of a widespread housing shortage across the country.
However, as purchasing power has fallen, list prices have only risen, reaching a new high of $446,924 in August this year.
The figures, according to NBC News, paint a nightmare for Americans trying to invest in property.
If you’re not making six figures, it’s going to be really tough,’ said Lawrence Yun, chief economist for the National Association of Realtors.
Perhaps because of the need for property, four million homes are still being sold each month despite rising mortgage rates.
The solution for buyers is to borrow a lot more money to buy a home than they did a few years ago.
Despite these challenges, people are still buying homes. Around 4 million are sold each month. But to a shocking degree, rising mortgage rates and a shortage of homes for sale – which feeds rising prices and bidding wars – have weakened their financial position.
People are now borrowing significantly more money for homes at much higher interest rates than a few years ago. Overall, a homebuyer’s dollar goes about half as far as it did at the end of 2020.
Mortgage rates were down to 2.68 per cent for a 30-year fixed mortgage in December 2020, but as of last month, the numbers are up to a shocking 7.63 per cent, according to Fannie Mae.
The average mortgage payment on a newly purchased home is now more than $2,000 a month, up from $1,100 three years ago.
Skyrocketing interest rates mean that homeowners locked into cheap mortgages are holding back from selling.
This in turn is pushing up house prices – meaning buyers are facing the least affordable market since 2006.
Pending home sales are down 13 per cent from a year ago, according to estate agent Redfin, and total home sales are down 16 per cent year-on-year through September.
And the housing shortage is most acute at price points that middle-income buyers can afford, according to the National Association of Realtors.
Joel Efosa, CEO of home buying company Fire Cash Buyers, owns several properties – including ones in Dallas, Texas, and Orlando, Florida.
Recently, I’ve noticed a significant increase in the number of requests from realtors looking to buy these homes,’ he told DailyMail.com.
I receive weekly mailings and sometimes even phone calls urging me to consider selling due to the high demand and skyrocketing property values.
His property in Dallas, which he bought for $200,000 a few years ago, is now valued at nearly double that amount, he said.
Clearly, the housing shortage is creating a seller’s market – and real estate agents are eager to capitalise on it,’ he added.
It comes as analysis by Bank of America (BofA) identified Dallas, along with San Antonio and Houston, as one of the four cities with the worst housing shortages in the US.
The list was rounded off by Orlando, Florida, which is also experiencing high population growth and low housing stock.
According to BofA, the areas with the most severe housing shortages are due to their buoyant labour markets, which are causing their populations to soar.
In Dallas, for example, the number of people on the non-farm payroll has increased by 14 per cent since January 2019. In Orlando, this number has increased by 10 percent.
Nationally, non-farm payrolls have increased by only 4 percent in comparison.
Widespread shortages in ‘hot’ areas have caused home prices to skyrocket, with Orlando seeing a 58 percent increase in home values in June 2023 compared to 2019.
Similarly, in Dallas, homes had increased in value by 29 per cent. But the researchers said San Antonio’s housing market was starting to ‘soften’ despite the shortage.
However, there are still some parts of the US that are less affected by the shortage.
At the other end of the spectrum, St Louis, Detroit and Miami were found to have the highest housing stock relative to population.
