17/09/2021

These housing markets need just a 10% down payment

The demand for homes has continued, driven by low inventory levels and record-low mortgage rates. 

According to the National Association of Realtors latest quarterly report, all but one of 183 markets have shown increased median sales prices.

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The report also revealed that 94% experienced double-digit price increases, compared to 89% in the first quarter of 2021.

Since last year, the median sales price of single-family existing homes rose almost 23 percent, and all regions saw double-digit year-over-year price growth. 

“Home price gains and the accompanying housing wealth accumulation have been spectacular over the past year, but are unlikely to be repeated in 2022,” said Lawrence Yun, NAR chief economist. “There are signs of more supply reaching the market and some tapering of demand,” he continued.

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Additionally, with rising home prices, monthly mortgage payments have grown as well.

The monthly mortgage payment on an existing single-family home financed with a 30-year fixed-rate loan and 20% payment rose to $1,215, which is an increase of $196 from a year ago.

Despite the effective 30-year fixed mortgage rate decreasing to 3.05% from 3.29% a year ago, the monthly mortgage payment still grew among all homebuyers. As a share of the median family income, the monthly payment rose to 16.5 percent in the second quarter of 2021. A year ago, it was at 14 percent.

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“Housing affordability for first-time buyers is weakening,” Yun said. “Unfortunately, the benefits of historically-low interest rates are overwhelmed by home prices rising too fast, thereby requiring a higher income in order to become a homeowner.”

For first-time home buyers, the mortgage payment on a 10 percent down payment loan rose to 25 percent of income. More than 25 percent of the family’s income would make the mortgage unaffordable.

In 2021, the report showed 14 metro areas where a family needed more than $100,000 to make a 10 percent down mortgage payment, including New York City, Jersey City, Boston and San Francisco.

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Despite this, there are a few metro areas where you need $25,000 or less to buy a home, and more specifically, where a family can afford to finance a home with a 10 percent down payment.

Here are the 4 most affordable housing markets:

Rust Belt areas of Youngstown-Warren Boardman, Ohio

You need $24,401 to afford a home in this area. According to Zillow, the average home price here is $127,274, with a population of about 536,081 and an estimated average salary of $28,064. Two of the largest employers in this metro area include General Motors and the U.S. Postal Service.

Ticker Security Last Change Change %
GM GENERAL MOTORS CO. 52.95 -0.70 -1.30%

Peoria, Illinois

To afford a home in this town, you would need $24,013. The average home price is about $100,085, according to Zillow, with a median household income of about $34,013 and an estimated population of 109,936. Caterpillar is one of the largest employers in Greater Peoria.

Ticker Security Last Change Change %
CAT CATERPILLAR, INC. 217.71 -0.86 -0.39%

Cumberland, Maryland

You could afford a home in this town with about $23,773. The average home price in Cumberland is $103,449, according to Zillow. The city has an estimated population of 19,650 and an average salary of $23,343. Started as a railroad town, manufacturing, coal mining and outdoor recreation now drive the city’s economy.

Decatur, Illinois

To afford a home in Decatur, you would need $21,481. The town has a population of about 69,553, with an average salary of $26,878. The average home price is $84,428, according to Zillow. Known as a major soybean processor in the 1900s, the largest employer in the town is now Archer-Daniels-Midland Company.

Ticker Security Last Change Change %
ADM ARCHER-DANIELS-MIDLAND CO. 62.68 +0.28 +0.45%

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“Housing supply will be critical in moderating the growing housing costs and rising rents,” Yun said. “Any disincentive to produce more housing inventory, such as extending the eviction moratorium, will only worsen the current shortage,” he explained.