By Emma Ockerman
As rates rose, the monthly payment on a median-priced home grew by 35%, pricing some people out of the market
The number of Black renter households who can afford to buy a median-priced home has slid by more than half in the past year, according to a blog post from a research analyst at Harvard University’s Joint Center for Housing Studies — showing another consequence of the unequal burdens borne by families of color as the cost of living soars.
While overall home prices have cooled from an earlier pandemic boom in response to rising mortgage rates, the jump in rates has nonetheless driven monthly housing payments to an unsustainable level for some households looking to buy.
As rates rose by nearly 2 percentage points from April 2021 to April of this year, hitting 4.98%, the monthly payment on a median-priced home including mortgage, estimated property tax and insurance costs grew by 35%, translating to potentially several hundred dollars in extra spending each month, according to Raheem Hanifa of the Joint Center for Housing Studies.
"Since 2020, the monthly mortgage payment [on a median-priced home] has increased from $1,400 to $2,800, and that increase has priced out a lot of potential homebuyers — particularly Black potential homebuyers have been priced out of being able to afford a home due to the increase," Hanifa told MarketWatch.
Last April, a household needed an annual income of at least $79,570 to swing monthly payments on a median-priced home around $341,000, Hanifa noted in his blog post. Within a year, the median home price shot up to $402,000, meaning a household needed to make $107,500.
It’s a shift that could push Black renters away from opportunities at homeownership, according to Hanifa. That’s particularly concerning since the gap between Black and white homeownership rates has actually worsened since 1960, before the Fair Housing Act was even law, according to the Urban Institute, a center-left think tank.
The number of Black renter households who could afford a median-priced U.S. home declined by 52% from April 2021 to April 2022, according to Hanifa’s analysis of American Community Survey data. The number of Hispanic renter households who could afford a median-priced home dipped by 50%, while the number of white renter households who could afford to buy fell by 42%.
"We definitely know that homeownership has been the primary way that American households have built wealth over time," Hanifa said, and homeowners over the last several years would have been able to build equity that translates into greater wealth. "That wealth can be used for rainy days. If you’re having a precarious financial situation, you can pull equity from the home; you can pass that wealth down to your kid and family," he said.
"When you haven’t had those opportunities, you’re more at risk when you have a financial crisis of not being able to meet your financial obligations," Hanifa added.
For some households, the rising cost of living is already a financial crisis. The median monthly asking rent surpassed $2,000 for the first time this year, according to Redfin, making saving for a home even more difficult for the families that were already paying close to the top of their budget.
Read next:’We feel like it’s rent gouging’: Renters meet with Biden administration officials to decry steep increases by landlords
-Emma Ockerman
(END) Dow Jones Newswires
08-25-22 0440ET
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.
© Copyright 2022 Morningstar, Inc. All rights reserved. Dow Jones Industrial Average, S&P 500, Nasdaq, and Morningstar Index (Market Barometer) quotes are real-time.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
About Author
