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RealtyTrac: Monthly Housing Payments Have Increased 21% Over the Past Year


More on the housing affordability front, which I think is a growing concern as the housing market continues to recover and possibly get somewhat ahead of itself.

On Friday, RealtyTrac reported that monthly housing payments increased an average of 21% in the fourth quarter of 2013 from a year earlier.

The rise in housing payments was attributed to both an uptick in mortgage interest rates and an improvement in home prices.

During the fourth quarter of 2012, the average monthly housing payment for a three-bedroom home was $714, based on a 20% down payment and a 3.35% 30-year fixed mortgage rate.

A year later, that figure was $865, thanks in part to the 30-year fixed rising to 4.46% and home prices rising roughly 10%.

The housing payment includes the mortgage, homeowners insurance, taxes, and maintenance, less the estimated income tax benefit.

Incomes Can’t Keep Up with Surging Home Prices

While a $150 per month increase might not sound like much, it’s a lot more problematic in higher-cost regions of the United States.

For example, in Los Angeles County the minimum qualifying income to purchase a median-priced home is now more than $95,000, up from $68,000 a year ago. That’s nearly a 40% jump!

Nationwide, the average minimum household income needed to qualify for a median-priced home increased to $41,544 in the fourth quarter, up from $34,262 a year prior, using a max front-end DTI ratio of 25%.

The three highest minimum qualifying incomes were in Northern California, including San Francisco County ($228,569), Marin County ($177,922), and San Mateo County ($170,284).

Homes were also quite expensive on the East Coast, as evidenced by the minimum qualifying incomes in Arlington County, Virginia ($158,474) and Hudson County, New Jersey ($142,684).

The largest increases in estimated monthly housing payments were in Contra Costa (CA) and Sacramento (CA) counties (up more than 50%), Wayne (MI) and Oakland (MI) counties (up more than 45%), and in Clark County, Nevada (up 43%).

Housing Payments Still Cheaper than Rents in Most Counties

Though the days of low rates and bargain home prices are pretty much over, housing payments are still lower than rents in most counties nationwide.

In fact, the average fair market rent for a three-bedroom home (as determined by HUD) during the fourth quarter still exceeded the estimated monthly housing payment in 91% of counties analyzed (296 out of 325).

However, the 29 counties where it was cheaper to rent than buy accounted for about 20% of the population.

And in the 15 most populated counties analyzed, estimated monthly housing payments were up an average of 34% from a year earlier.

That made it more expensive to buy than rent is six of those 15 counties; a year ago, just one of those counties was deemed more expensive to buy.

The good news is most investors have probably lost interest in the housing market, making it more of a buyer’s market nowadays.

But as RealtyTrac vice president Daren Blomquist aptly pointed out in the press release, financed homeownership is beginning to become “dangerously disconnected” with sluggish incomes.

I suppose this is the danger of artificially low mortgage rates. It also means all-cash buyers still have quite an upper hand, seeing that they only need to concern themselves with the asking price.

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