Just How Low Exactly is Housing Inventory?

Rising Mortgage Rates Continue to Squeeze Housing Affordability

Mortgage rates continued their ascent this week, increasing to 8.0% for a 30-year fixed rate mortgage according to Mortgage News Daily. Since the Federal Reserve began tightening monetary policy to combat inflation, mortgage rates have more than doubled, creating significant housing affordability challenges.

The chart below illustrates the rising cost of financing a median priced home in the United States using a conventional mortgage. As borrowing costs increase, affordability continues to deteriorate for many prospective home buyers.

Consequently, two key ratios that lenders examine when determining mortgage eligibility have worsened considerably. These include the housing-to-income ratio (HTI) and debt-to-income ratio (DTI). Both metrics have moved closer to underwriting limits.

Higher monthly payments combined with slower income growth continue to reduce purchasing power and place pressure on household budgets across the country.