Nearly two out of five homeowners (38%) said they could not afford to buy their own home if they were purchasing it today, according to a new report from Redfin (NASDAQ: RDFN).
In a February survey of nearly 3,000 U.S. residents, 59% of homeowners who answered Redfin’s question said they lived in their home for at least 10 years, and another 21% have lived in their home for at least five years. Redfin noted that the median home sale price has doubled in the last 10 years and soared by nearly 50% during the last five years.
The typical person purchasing today’s median-priced home for about $420,000 has a record-high $2,864 monthly housing payment with a 7.1% mortgage rate, the current 30-year fixed-rate average. If they were to purchase a home for the same price with a 4% mortgage rate, which was common in 2019, their monthly payment would be $2,210, roughly $650 less.
As for those who have yet to become homeowners, Redfin reported that nearly 40% of renters do not believe they’ll ever own a home, up from 27% last year.
“Rising home prices are a double-edged sword. On the one hand, Americans who already own homes benefit from rising values and they can consider themselves lucky they broke into the housing market while they could still afford it,” said Redfin Senior Economist Elijah de la Campa. “On the other hand, price appreciation makes the prospect of buying a new home daunting or even impossible for many people who want to move. Prices have risen enough that a similar home and location would be much pricier than a home someone already owns–even accounting for inflation. Add elevated mortgage rates to the equation, and moving up to a bigger, better home is even more costly and perhaps out of reach.”
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So what’s the point of this story? People should just give up? The lesson I learn here is that it’s a good thing people bought their home when they did. The same thing applies today. They might not be able to buy as big a home as they could have 5 years ago, but it’ll be theirs.
so true.