Payment on New Mortgages Take 46.4% of Typical Income

By the Numbers: A Striking Figure in Personal Finance News Today

A jar with money in it is labeled "mortgage." In the background, arrows are pointed up with the number "46.4%."
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The Balance/Alice Morgan

Annual homeownership payments ate up 46.4% of the median U.S. household income in October, a record high that is a clear sign of the affordability crisis plaguing the housing market. 

That’s according to the most recent data from the home affordability tracker published by the Federal Reserve Bank of Atlanta. The tracker uses data dating back to 2006 and calculates an average homeownership payment as a share of income. This number ticked up from September when homes bought cost an average of 46.3% of household income.

But it wasn't just the fall—affordability worsened significantly throughout 2022. Payments, which include taxes and insurance with a 10% down payment, have skyrocketed since the beginning of 2021 because of soaring home prices and, more recently, mortgage rates.

A payment is considered “affordable” if it takes up 30% of household income or less. For instance, the average payment took up 29% of the median U.S. income in February 2020, the month before the COVID-19 emergency was declared.

Since then, soaring costs have put homeownership out of reach for many would-be buyers and slowed home sales to a crawl—the typical monthly homeownership payment was $2,682 in October, compared to $1,918 at the outset of 2022, and $1,540 just before the pandemic.

Fortunately for homebuyers, the intense cost pressures have abated since October, but only slightly. The average rate offered for a 30-year fixed mortgage peaked at just over 7% in mid-November, according to mortgage giant Freddie Mac, and has since decreased to 6.33% as of last week.

Whether the downtick was enough to encourage more buyers to jump into the market will become clear Friday when the National Association of Realtors releases data for December existing home sales.

Have a question, comment, or story to share? You can reach Diccon at dhyatt@thebalance.com.

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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Federal Reserve Bank of Atlanta. "Home Ownership Affordability Monitor."

  2. Freddie Mac. "Mortgage Rates."

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