Monthly Housing Costs Jump 21%, But Still Less Than Rent in Many Markets

Monthly Housing Costs Jump 21%, But Still Less Than Rent in Many Markets It is 21 percent more expensive, on average, for U.S. borrowers to maintain a home, including mortgage payments, insurance, taxes and maintenance, according to RealtyTrac‘s latest analysis.
The jump in monthly housing payments came in the fourth quarter of 2013 as the result of an average 10 percent rise in median prices across the 325 counties reviewed.
Based on a 30-year fixed rate mortgage with an interest rate of 4.46 percent and a 20 percent down payment, the average monthly house payment across all counties for three-bedroom homes purchased in the fourth quarter of 2013 was $865.
That’s up from $714 for homes purchased in the fourth quarter of 2012 — based on a 3.35 percent interest rate a year ago, RealtyTrac found.
That price increase came with a 33 percent increase in the average interest rate for a 30-year fixed rate mortgage, as reported by Freddie Mac.
The formula used by RealtyTrac subtracts the estimated income tax benefit from owning a home.
Lower Than Average ‘Fair Market’ Rents
Despite the increase in financing costs, the analysis found that the estimated monthly house payment for a median-priced three bedroom home in the fourth quarter was lower than average fair market rent for a three bedroom home in 91 percent of the counties analyzed (296 out of 325). RealtyTrac used the fair market rents set by the U.S. Department of Housing and Urban Development for 2014.
“The monthly cost of owning a home is still less than renting in the majority of markets, but the cost of financed homeownership is becoming dangerously disconnected with still-stagnant median incomes, driven not by shoddy underwriting practices this time around but by investors and other cash buyers who are not tethered to the typical affordability constraints,” said Daren Blomquist, vice president at RealtyTrac.
However, the 29 counties where estimated monthly house payments were higher than fair market rents accounted for 20 percent of the population for all 325 counties analyzed.
These 29 counties included the California counties of Los Angeles, Orange, Santa Clara, Alameda, Ventura and San Francisco, along with King County, Wash. (Seattle), Suffolk County and Westchester counties in the New York City region, Will County in the Chicago metro area, and Denver County, Colo.
Moreover, there is a significant disconnect between prices and incomes in some markets, Blomquist said.
“For example, in Los Angeles County, the minimum qualifying income needed to purchase a median-priced home is at more than $95,000, up from about $68,000 just a year ago,” he said.

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