RFalling mortgage interest rates continue to push potential buyers, especially first-time buyers, out of the homeownership market, says affordable housing expert for the Texas Real Estate Research Center (TRERC) at Texas A&M University.
“As mortgage interest rates rise, so does the total monthly mortgage payment,” said Dr Clare Losey, assistant research economist for TRERC. “It increases the income required to qualify for a mortgage. In other words, as mortgage interest rates rise, purchasing power declines and households need to earn more money to buy a house at the same price.
At the start of 2022, the average 30-year fixed-rate mortgage in the United States was hovering around 3%, according to Freddie Mac. By May 19, the average rate had jumped more than 2 percentage points to 5.25%.
“In the first quarter, the income required to qualify for a 3% mortgage was $59,665 for the first quartile Texas selling price of $229,000. The first quartile sale price generally reflects the affordable home price for first-time buyers,” Losey said.
The qualifying income requirement increased by more than $10,000 to $70,891 at a rate of 5.5%. She estimates that only 30% of Texas renters, or potential first-time buyers, could afford the state’s first-quartile sale price of 5.5%. That’s down nearly 10 percentage points from the estimated 38.9% of Texas renters who could afford the state’s first quartile sale price at 3%.
For more information, see the new Texas Housing Affordability Outlook report.