Houses

There is a conundrum in the housing market that defies economic logic. There are more buyers than sellers which means the price of houses is rising but many of these buyers will not qualify for a loan. Average home price 2020 $336,900 2021 $397,100 2022 $454,900 Most home buyers are saving to get a down payment so most will use and FHA loan which only requires 3.5% down. With this type loan the borrower must purchase mortgage protection insurance which cost about $50 per month for each $100,000 of mortgage. In 2020 if you bought an average home for $336,900 and paid 3.5% down ($11,791) you would mortgage $325,108 at 2% for 30 years is a monthly principal and interest of $1,202. Add to that the cost of mortgage protection insurance of $168 and your total house payment is $1,370. This year the same house with a 3.5% down payment ($15,921) would cost $3,221 plus mortgage protection insurance of $227 for a total house payment of $3,448. Add to that property tax which averages one percent and insurance at one half percent and the total cost the lender sees has risen from $1,791 in 2020 to $4,016 in 2022. The lender wants this payment to be no more than 30% of your gross which means in 2020 you had to earn $71,648 to qualify for the average home but in 2022 that figure was $160,640. Since the medium family income has decreased from $78,000 to $74,000 it is difficult to understand why demand for houses has increased. In addition many people do not want to sell their home because current rates on a 30 year fixed are over 8% and just three years ago the rates were under 2%. The result is there are not enough affordable houses on the market.