RealtyTrac released a housing affordability analysis, noting an average 21 percent increase in monthly house payments from a year ago.
325 U.S. counties were included in the analysis that measured “house payments for a median-priced three-bedroom home purchased in the fourth quarter of 2013—including mortgage, insurance, taxes, maintenance, and subtracting the estimated income tax benefit.”
The report showed that the average house payments of homes purchased in the fourth quarter of 2013 rose to $865, based on a 30-year fixed rate mortgage with an interest rate of 4.46 percent and a 20 percent down payment.
House payments have risen from the fourth quarter average of $714 in 2012, when interest rates were 3.35 percent.
Freddie Mac’s Primary Mortgage Market Survey reported a 33 percent increase in the average interest rate for a 30-year fixed mortgage, helping to push housing prices higher.
The increase in interest rates caused an average 10 percent rise in median prices across the counties measured.
“A potent combination of rapidly rising home prices and the often-overlooked but significant uptick in interest rates in the second half of 2013 caused the monthly cost of owning a home using traditional financing to jump substantially in many markets over the last year,” said Daren Blomquist, VP at RealtyTrac.
“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,” Blomquist said.
Counties with some of the biggest increases in estimated monthly house payments included Contra Costa and Sacramento counties in California (both up more than 50 percent), Wayne and Oakland counties in Michigan (both up more than 45 percent), and Clark County, Nevada (up 43 percent).
Despite rising interest rates and increased activity from investors and cash buyers, buying a home is still cheaper than renting in most counties.
The average income needed to qualify for a median-priced home was $41,544 in Q4 of 2013. The average minimum income needed to rent a three-bedroom home at fair market rents for 2014 was $43,892.
The report noted “the estimated monthly house payment for a median-priced three bedroom home in the fourth quarter of 2013 was lower than average fair market rent for a three bedroom home—set by the U.S. Department of Housing and Urban Development for 2014—in 91 percent of the counties analyzed (296 out of 325).”
The 29 counties where it’s cheaper to rent, however, are heavily populated metros. They account for 20 percent of the population of measured counties.
Areas include the California counties of Los Angeles, Orange, Santa Clara, Alameda, Ventura and San Francisco, along with King County, Washington (Seattle), Suffolk County and Westchester counties in the New York City region, Will County in the Chicago metro area, and Denver County, Colorado.
The 15 most populated counties house payments increased an average of 34 percent from a year ago, making house payments higher than renting in 6 of the 15 largest counties.
“A year ago only one of those 15 counties—Santa Clara County in the San Jose area of Northern California—had an estimated monthly house payment above the average fair market rent,” the report said.