By Lizzie Kane
First-time buyers are spending far more than recommended on mortgage payments after borrowing costs in the US surged.
Those consumers typically spent 37.8% of their income on mortgage payments in the third quarter, up from 36.8% in the prior period, the National Association of Realtors said Thursday in a statement. The group said the payments are considered unaffordable if the monthly bill, including principal and interest, is more than 25% of a family’s income.
Potential buyers are facing an affordability crunch as mortgage rates have more than doubled this year, slowing home sales across the country. Now, the monthly mortgage bill on a typical existing single-family home with a 20% down payment totals $1,840, about $614 more than a year ago.
In the third quarter, 46% of the 185 metro areas measured by the Realtors group posted double-digit home-price gains from a year earlier, down from 80% of those areas in the second quarter.
“Much lower buying capacity has slowed home-price growth and the trend will continue until mortgage rates stop rising,” Lawrence Yun, NAR’s chief economist, said in the statement.
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