The Median U.S. Home Price Is Now $391,200. Can You Swing It?
- Home prices are up 14.8% from a year ago.
- Low inventory is a big reason property values remain elevated.
Home prices are still holding steady at inflated levels.
There's a reason so many wannabe buyers continue to struggle to become homeowners. Housing prices have been sky-high since the latter part of 2020, and even though mortgage rates have been on the rise this year, buyer demand doesn't seem to be dropping off.
In April, homes stayed on the market for an average of just 17 days before being scooped up, reports the National Association of Realtors. And 88% of homes sold in April were on the market for under a month.
Meanwhile, the median sale price for existing homes sold in April rose to $391,200. That marks a 14.8% increase from April of 2021, when the median sale price was $340,700.
April's numbers actually mark 122 consecutive months of annual home price increases. That's the longest streak on record.
Can you afford a $391,200 home?
Clearly, it costs more money to buy a home today than it did a year ago, and a year before that. And so you may be wondering if you can swing the cost given today's numbers.
The answer to that depends on a number of factors:
- Your income
- Your credit score
- The amount of money you have on hand for a down payment on a home
As a general rule, your housing costs should not exceed 30% of your take-home pay. And those housing costs should include your monthly mortgage payment as well as expenses like property taxes and homeowners insurance.
Meanwhile, your credit score will play a role in the mortgage rate you're able to qualify for. And that, combined with your down payment, will dictate what your monthly mortgage payment looks like.
So, let's say you bring home $6,000 a month in your paychecks and you're looking at putting 20% down on a $391,200 home. If you take out a 30-year mortgage at today's average rate of 5.437%, you'll be looking at a monthly principal and interest payment of $1,764.
Now, let's say that between property taxes and homeowners insurance, you're looking at an extra $336 a month. That brings your total to $2,100.
However, 30% of $6,000 is only $1,800. So in this case, you actually can't afford a $391,200 home.
But remember, this is one illustration. Maybe you're able to put more money down on a home, and your credit score is so high that you can qualify for a lower interest rate on a mortgage. In that case, you might manage to lower your housing costs to the point where you don't exceed that 30% limit.
Should you wait to buy?
Home prices are clearly elevated these days, and it may be a while before they drop down to more moderate levels. If you can comfortably afford a home of your own and find one you're excited to live in, then you may want to move forward with a purchase, especially if you're tired of renting. But if you decide to wait, you might end up spending a lot less on a home -- and having a much easier time affording one.
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