By Elizabeth Renter | NerdWallet
High home prices are easier to stomach when mortgage rates are ultra-low. But in the second quarter of this year, climbing prices paired with relatively high interest rates made life even more difficult for potential first-time buyers.
In 2022, rates on 30-year mortgages climbed from just over 3% to nearly 7%, and the dramatic increase scared some potential home buyers away from the market. But this year, as buyers understand that these rates are here to stay, demand has returned. Unfortunately for first-time buyers, the rates that give them pause are a full-on roadblock for current homeowners with low-rate mortgages who would otherwise sell. This is keeping inventory levels low and maintaining tight competition in a high-price environment.
First-time buyers typically face a tougher market than those buying for the second or subsequent time. The biggest constraint: They’re likely on a stricter budget. This can seriously impact the number of homes available to them, and in a housing market with an already-sparse supply, first-time buyers willing to brave the environment are in brutal competition with one another.
In the second quarter of this year, prices rose, likely in part due to traditional seasonal fluctuations, but also due to continued low inventory. The adage that an affordable home is one listed at three times your income moved further out of reach.
Affordability down across large metros in second quarter
The second quarter typically ushers in homebuying season and higher prices compared with the prior three-month period. In the second quarter of this year, that was certainly true, as homes were listed at 5.8 times potential first-time buyer income, compared with 5.5 times in the first quarter of the year. The decreased affordability was even more pronounced in the country’s 50 most populous metro areas. Among those metros, homes were listed at 6.1 times first-time buyer income, compared with 5.6 times in the first…
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