Mortgage payments remain high due to stubborn interest rates that have stayed in the high 6 percent range for 30-year fixed mortgages.
However, the exact amount you may be paying could depend dramatically based on where you live, according to a new report from business accounting firm Avenues Financial.
Why It Matters
On Tuesday, the average interest rate on a 30-year fixed-rate mortgage grew seven basis points to a 6.981 annual percentage rate, according to Zillow.
That's compared to the average rate on a 15-year fixed-rate mortgage, which dropped two basis points to a 6.06 annual percentage rate. These rates are keeping homeownership out of reach for millions.
What To Know
The Avenues Financial study compared data from the Bureau of Economic Analysis and the U.S. Census American Community Survey to figure out how much of Americans' incomes they were spending respectively toward their mortgage payments based on median income.
The states that saw the most substantial mortgage costs were as follows: Hawaii, California, Utah, Oregon, Idaho, Washington, Colorado, Nevada, Massachusetts and Arizona.
Hawaii homeowners spent a monthly amount of $4,638 on average (making up 95 percent of the median income), while Californians paid a little lower at $3,977, or 69 percent of their median income. Utah residents were third in line, paying $2,837 on average, which translated to 60.7 percent of their median income.
What People Are Saying
Nicole Jensen, CPA, said in a statement in the study: "Rental figures, even in the majority of the top ten states identified as having the highest median rental payments when compared to income, are estimated only slightly higher than the recommended 30 percent. However, as this is based on median figures, and many people who rent are likely on lower incomes than those on which the percentages are based, it gives scope that rental costs may remain unaffordable for many Americans."
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "The recurring theme in the list of the states with the highest mortgage payments is most states are either on or neighboring the West Coast. No one is surprised by seeing Hawaii or California ranking at the top. Both have been long-standing states on these lists that have some of the world's most desirable properties for the proximity to beaches and other natural and man-made attractions. However, seeing Utah, Nevada, and Arizona shows those states close to the West Coast are reaping the benefits of an inflow of new residents and higher home prices to match."
Kevin Thompson, a finance expert and the founder and CEO of 9i Capital, told Newsweek: "Hawaii, California and Massachusetts face severe housing shortages, which push prices higher. Geography, population density and zoning restrictions make new development difficult, limiting supply and driving up costs. Meanwhile, migration and remote work trends have fueled home price increases in states like Utah and Idaho, which have seen influxes of residents from California seeking lower-cost housing, further straining supply."
Title and escrow expert Alan Chang told Newsweek: "It's no surprise to see that Idaho is on the list as this state has been a very popular destination for remote workers fleeing higher housing cost states in recent years. Hawaii real estate has been high priced for many years now, with very limited supply causing higher valuations year over year. Record low interest rates drove housing costs to historic highs and current interest rates are only starting to slow the valuation growth to more realistic amounts."
Lawrence Yun, NAR Chief Economist and Senior Vice President of Research, told Newsweek: "Mortgage rates are fairly uniform across the country, but what varies are home prices and local income. Therefore, the states with persistently high home prices, like California and Hawaii, will carry higher mortgage payments. Also, lower-income but fast-appreciating states, like Idaho, will require a higher housing payment in relation to income."
What Happens Next
Since home prices on the West Coast and in Hawaii tend to be higher than in the Midwest and South and insurance costs continue to increase, finding an affordable home remains impossible for many, Thompson said.
"High mortgage rates have made homeownership unattainable for many, as prices remain elevated beyond what's affordable for middle-income buyers. Institutional investors buying up homes for rentals have further tightened supply, worsening the affordability crisis," Thompson said.
"There's growing debate over whether government intervention is needed to curtail large-scale investor purchases, which have contributed to low inventory and rising costs, making it even harder for first-time buyers to enter the market."
English (US) ·