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Mortgage rates are back above 7% again
This is an excerpt from our free Sunday Finds newsletter at Chit Chat Money: https://chitchatmoney.substack.com/p/sunday-finds-3-thoughts-from-last-fdb
'After dipping in late 2022 and early 2023, the average rate for 30-year mortgages in the United States shot up above 7% again this week:
> At the start of this year, with rates slightly lower, it appeared the housing market was starting to recover just in time for the traditionally busy spring season. But that recovery has now stalled, and rising rates are only part of the picture.
According to Redfin, this means the average mortgage payment is up 26% year-over-year and now sits at approximately $2,500 a month.
This is up from approximately $1,500 in 2020, meaning that new homebuyers are — on average — spending $1,000 more each month to finance their home purchases. That equates to $12,000 in extra shelter costs every year.
The median salary in the United States is $70,000. Doing some quick math, that means on average, new homebuyers are spending an extra 17% of their income to finance homes compared to 2020.
I sound like a broken record, but how does this eventually not have negative consequences?
I know, I know, I know, there is a huge chunk of the population that has fixed mortgage payments with interest rates below 5% that they will have no problem paying off. I’m not talking about them.
There is a consistent flow of new people who want to buy homes every month. Unless home prices fall or these people suddenly start making 20% more in salary each year, this demographic is going to have significantly less disposable income to spend on entertainment, travel, and other discretionary items."
Man 17% more in housing expenses compared to 2020, that is rough
@nathanworden It's tough out there for new homebuyers. No one in their right mind would buy a home today
where will they stop?
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