For hopeful homebuyers, the dream of owning property is often shattered by the stark reality that the housing market is nearly unaffordable. New data from JPMorgan Chase shows that homebuyers had to spend an additional 45% of their incomes on mortgage payments in 2024 compared with 2019.
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The fact is that potential homeowners face more obstacles than ever and will have to pay almost double each month. Given the economy, is buying a home still worth it?
Home Prices and Mortgage Rates Are Rising
According to JPMorgan Chase, home price indexes jumped 50% between 2019 and 2024. During this same time, 30-year fixed mortgage rates rose from 3.7% to 6.9%, meaning that monthly mortgage payments nearly doubled for most prospective buyers over the course of five years.
Unfortunately, wages did not increase at the same breakneck pace. The financial services company reported that the median income increase for typical first-time homebuyers (people aged 25-44) was only 41% from 2019 to 2024. Therefore, people trying to buy homes today not only are going to face higher mortgage payments but also are doing it on wages that couldn’t keep up with increasing costs.
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Preference for Owning
Despite these obstacles, many renters would like to still own. As reported by the Federal Reserve Bank of New York, 49% of renters said they would strongly prefer owning. However, only 34% said there was a probability of owning a primary residence in the future.
This discrepancy is likely explained by the fact that people, when surveyed, believed mortgage rates and home prices would continue to rise.
Hope on the Horizon
The housing market is notoriously difficult to predict. The good news is that experts believe the mortgage rates may come down, albeit only slightly, in the near future. While it may not drop to the lows seen in 2019, some forecasts suggest it could drop somewhat by 2027, per U.S. News & World Report.
A drop in mortgage rates would help hopeful homeowners. Even a 1-percentage-point change in the rate could save homeowners hundreds of dollars a month and thousands over the course of the loan.
To Buy or Not To Buy
The question, however, remains whether potential homebuyers should take the leap or wait it out. Housing experts believe that while waiting for a substantial drop in rates might seem like a good idea, it could prove to be costly. U.S. News reported that while rates may come down slightly, they are not expected to drop significantly, and home values are expected to rise.
Additionally, if there is a drop in rates or home prices, it could send buyers swarming to the market, creating more competition. Prospective buyers who are financially steady and have a stable income could consider buying now. If rates come down in the future, homeowners can consider refinancing, which could end up saving hundreds of dollars each month.
On the other hand, potential buyers with unstable finances or uncertain income may want to continue to hold off to ensure they don’t end up overextended. Buying a home is really dependent on individual circumstances and should not be handled with a one-size-fits-all approach.
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This article originally appeared on GOBankingRates.com: JPMorgan Chase: Homebuyers Now Have To Spend 45% More of Their Incomes on Mortgages — Is Homeownership Still Worth It?
