– October saw stubbornly elevated mortgage rates, leading to affordability pressures for homebuyers.
– The monthly payment needed to purchase a median-priced home exceeded $2,500 for the first time ever.
– It now takes 40.6% of the median household income to afford monthly mortgage payments, making housing the least affordable since 1984.
– Interest rates were above 7.5% for the entire month, reaching a high of 7.80% on October 25, the highest in 23 years.
– Lack of housing inventory is also contributing to high home prices.
– Consumer demand fell in October due to higher mortgage rates and fewer homes on the market.
– Purchase mortgage applications declined 47% below pre-pandemic levels.
– The refinance market remained almost non-existent, except for equity-driven, cash-out refinance transactions.
– U.S. mortgage holders have $16.4 trillion of home equity, with $10.6 trillion considered tappable equity.
– Lenders are losing customers seeking to tap equity due to an inability to identify and market to them.
– Coastal areas, primarily in California and Florida, remain the least affordable housing markets.
– In 75% of U.S. markets, borrowers need to earn 10 percentage points more than the local market’s income to afford a median-priced home.
Stubbornly elevated mortgage rates created more affordability pressures for homebuyers in October, according to ICE Mortgage Technology’s November Mortgage Monitor report.
In October, the monthly payment needed to purchase a median-priced home exceeded the $2,500 threshold for the first time ever. It now takes 40.6% of the median household income to afford monthly mortgage payments, making housing the least affordable it’s been since 1984.
“For all but a single day, interest rates spent the entire month of October above 7.5%, topping out at 7.80% on Oct. 25,” ICE Vice President of Enterprise Research Andy Walden said in a statement. “Mortgage rates haven’t been that high in 23 years, which continues to hammer affordability.”
However, the lack of housing inventory is also another driver of the high home prices.
With a one-two punch of higher mortgage rates and fewer homes on the market, consumer demand fell in October. The number of purchase mortgage applications declined 47% below pre-pandemic levels for the week of Oct. 26.
Meanwhile, the refinance market remained almost “non-existent,” with the exception of equity-driven, cash-out refinance transactions, ICE reported.
“In fact, the refinance market in general is but a shadow of what it once was,” Walden said. “There are pockets of cash-out lending occurring among a particular set of borrowers, but even that has been a niche market.”
Rising home prices are boosting home equity
The good news is that U.S. mortgage holders are sitting on some $16.4 trillion of home equity, out of which $10.6 trillion is considered “tappable equity.”
“Unfortunately, with borrower retention at a 17-year low, lenders are losing customers seeking to tap equity via cash-outs,” Walden said. “What’s notable is that they are losing this business not due to their rate offerings, but rather an inability to identify and market to those borrowers likely to transact in today’s market.”
Overall, the coastal areas, primarily in California and Florida, remain the least affordable. New York City, Nashville, Las Vegas, Seattle and Salt Lake City round out the list of the most expensive markets.
In 75% of the U.S. markets studied, borrowers need to earn 10 percentage points more than the local market’s income to afford the median-priced home.
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Now, let’s dive into the article that sheds light on some interesting real estate trends. According to ICE Mortgage Technology’s November Mortgage Monitor report, mortgage rates have been on the rise, putting pressure on potential homebuyers. In fact, the affordability of housing in the United States hasn’t been this low since 1984. Yikes!
The main culprit behind this affordability crisis is twofold. First, stubbornly high mortgage rates, reaching levels not seen in 23 years, are making it more difficult for people to afford monthly mortgage payments. Second, the shortage of available homes on the market is driving up prices, further exacerbating the situation.
As a result, consumer demand has taken a hit, with the number of purchase mortgage applications dropping significantly. On the other hand, the refinance market has also slowed down, except for cash-out refinance transactions driven by homeowners seeking to tap into their home equity.
Speaking of home equity, the article mentions that U.S. mortgage holders have a whopping $16.4 trillion of home equity, with $10.6 trillion being considered “tappable equity.” However, lenders are struggling to retain customers interested in cashing out their equity due to difficulties in identifying and reaching out to potential borrowers.
When it comes to affordability, coastal areas like California and Florida remain the least affordable, followed by cities such as New York City, Nashville, Las Vegas, Seattle, and Salt Lake City. In most U.S. markets, borrowers need to earn 10 percentage points more than the local market’s income to afford a median-priced home.
In conclusion, the