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Homebuyers are paying record high mortgage payments as affordability deteriorates - Yahoo Finance

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The average homebuyer in July is shouldering the highest mortgage payment on record — as affordability reaches its worst point in nearly four decades.

The average monthly principal and interest payment for borrowers buying a home using a 30-year fixed rate mortgage in July was $2,306, according to mortgage technology data provider Black Knight, the highest on records dating back to 2000. That's also $871 more than just two years ago.

That average payment took up 36.5% of the median household income in July, up from 24.3% in 2021 and marking the highest share on Black Knight's record.

The figures underscore how tough purchasing conditions have become for homebuyers, especially entry-level ones, with relief a faraway possibility as mortgage rates push higher alongside prices.

“This got our research team to wondering, ‘just when did the $2,000-$3,000 monthly P&I payment become the norm?’" Black Knight analysts said in a release accompanying the report. "The answer, as to so many other questions, is: since the pandemic."

Terri Straka stands on the porch of her new home while she finalizes details with a real estate agent in Myrtle Beach, South Carolina. (Credit: Madeline Gray for The Washington Post via Getty Images)
Terri Straka stands on the porch of her new home while she finalizes details with a real estate agent in Myrtle Beach, South Carolina. (Credit: Madeline Gray for The Washington Post via Getty Images)

Overall, 51% of homeowners who purchased in July are paying $2,000 or more a month, up from 18% two years ago. Additionally, 23% of new homeowners had payments of more than $3,000, up from 5% in 2021, according to Black Knight.

The average payment of $2,306 also doesn't include taxes and insurance, which would tack on an additional $550 a month on average, Black Knight found, though that figure would vary depending on location.

Circumstances only worsened as rates surged higher in August, topping 7% for three straight weeks during the month.

For instance, with rates at 7.23% on Aug. 24, a hypothetical buyer purchasing a median-priced home using a 20% down would face a $2,423 monthly mortgage payment — a 91% increase over the past two years.

That would mean it would take more than 38% of the median household income to make that payment, making housing the least affordable that it’s been since 1984, Black Knight noted.

Home prices likely will remain elevated

Chad Wootton looks at the listings of homes for sale while talking on the phone in Los Angeles. (Credit: Jae C. Hong, AP Photo)
Chad Wootton looks at the listings of homes for sale while talking on the phone in Los Angeles. (Credit: Jae C. Hong, AP Photo)

Elevated home prices have been yet another challenge for prospective buyers.

Black Knight's home price index hit a peak of $445,000 in July, marking the third consecutive all-time high since May. Year over year, home prices jumped 2.3% in July, up from 0.9% in June — a trend that would “probably continue,” said Black Knight vice president of enterprise research, Andy Walden.

In July, 99 of the 100 largest markets registered month-over-month price gains, the report showed.

“If price gains were to maintain their current pace – which is unlikely given how tight affordability has become, it would result in gains returning above 7.5% by the end of the year,” Walden said in a statement. “Either way, further acceleration in annual appreciation is almost a certainty for August.”

Gabriella is a personal finance and housing reporter at Yahoo Finance. Follow her on Twitter @__gabriellacruz.

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