Housing affordability is set to worsen to levels last seen early in the financial crisis as rising mortgage rates compound high prices, according to S&P Global Ratings.
By the end of this year, mortgage payments will make up 28% of income for the typical first-time buyer — the highest since the first quarter of 2007 — assuming a 10% down payment, S&P North American Chief Economist Beth Ann Bovino said in a report. Mortgages shouldn’t exceed 25% of income to be considered affordable, per guidelines from the National Association of Realtors.
That threshold has already been breached for low- and middle-income buyers and will remain “well above” it through 2025, leaving 60% of US households out of the market, S&P said.
“High home purchase prices don’t necessarily mean that homes have become unaffordable, but after over a decade of relatively benign home purchase conditions, our analysis of housing market conditions shows affordability has worsened in recent years,” the report said.
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