While surging mortgage rates and housing prices have taken away consumers' purchasing power, low supply has kept the market competitive. As a result, affordability has tumbled dramatically from the early days of the pandemic.The 30-year mortgage rate, a popular option for home buyers utilizing financing, is key to understanding the market. This rate is essentially the borrowing costs tied to purchasing a home with financing.
High prices can elicit different feelings by group. For hopeful homeowners, it can raise red flags that they are planning to buy at the wrong time. But current owners can see reason to celebrate, as it likely means their own property's value has risen. Another way the Atlanta Fed tracks this is through the share of income needed by the typical American to afford the median home. Nationally, it last required 43% of their pay, well above the 30% marker considered the threshold for affordability. It has been considered unaffordable, or above 30%, since mid 2021.
Just shy of 98% of mortgages were below the average rate seen in the fourth quarter of last year, the FHFA found. Nearly 69% had a rate that was a whopping 3 percentage points below that average.