First of all, the numbers. The average “starter home” price nationally was $183,500 in the third quarter this year. With 10 percent down and a mortgage rate rate of 5.83 percent, the average during the same time period, a new homebuyer would need annual income of almost $50,000 to qualify for a mortgage.
Here’s the article on CNN and the data come from the National Association of REALTORS®. (Note: REALTORS® is a registered trademark and apparently must always appear written using “uppercase” letters. I don’t understand the need for this — why would a profession be trademarked? What are they trying to protect?)
Regardless, this is just another reason why I can’t consider having my own place at the moment. Eventually, the market will be more favorable.
Published or updated November 7, 2005. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.
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A third of your income can be spent on housing prudently? That is hard to believe. Is that the percentage that mortgage lenders use?
It is the percentage that is generally accepted as “safe” by mortgage lenders. Scary huh? By the way, in the Bay Area, most people would be very, very lucky to be paying around 30% of their income on housing.
I believe a third of your income used to be the lending limits also. Those have been relaxed and you can qualify for loans of up to almost 50% of your income for housing now I believe.
Now that is scary.