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Climbing cost of homeownership

By Judy Martel · Bankrate.com
Tuesday, February 25, 2014
Posted: 4 pm ET

Many of the recent housing woes have been blamed on unusually cold winter weather and a lack of available homes for sale. But another reason buyers are not rushing to sign a deal could be that owning a home is getting a lot more expensive.

mortgages-83x123According to an analysis by RealtyTrac, the average monthly payment for a three-bedroom home purchased in the fourth quarter of 2013 shot up by 21 percent in the past year. The calculation includes the estimated cost of a mortgage, homeowners insurance, property taxes and maintenance and subtracts the estimated income tax benefit.

Average monthly house payment for a three-bedroom home in the 325 counties included in the analysis was $865 in fourth quarter of 2013, based on a 30-year fixed rate mortgage with an interest rate of 4.46 percent and a 20-percent down payment. That's up from $714 for the same size home in the fourth quarter of 2012, using an interest rate of 3.35 percent.

The rise is due to median home price increases of 10 percent in the 325 counties, along with that increase in the average 30-year fixed mortgage rate, as reported by Freddie Mac.

In Bankrate's mortgage survey, the average rate in the fourth quarter of 2013 was 4.46 percent (same as Freddie Mac's average), while the average rate in the fourth quarter of 2012 was 3.56 percent (almost a quarter percentage point higher than Freddie Mac's).

Incomes and house payments out of sync

The danger in the affordability statistics is that median monthly incomes are not keeping pace, Daren Blomquist, vice president at RealtyTrac, notes in a statement.

"One simply needs to look at the minimum income needed to qualify for a median-priced home in some markets to realize the extent of the disconnect between prices and incomes," Blomquist says. "For example, in Los Angeles County, the minimum qualifying income needed to purchase a median-priced home is at more than $95,000, up from about $68,000 just a year ago."

Even with the increase in the cost of buying a home with a mortgage, it's still cheaper to own in 91 percent of the counties analyzed than it is to rent a three-bedroom home. However, 20 percent of the population resides in the 29 counties where it is more expensive to own than it is to rent. They include counties in Southern California, the San Francisco area and the regions around Chicago and New York City.

Bankrate has a calculator to help you determine how much house you can afford and one to help you decide whether you should buy or rent.

Keep up with your wealth and mortgages and follow me on Twitter: @JudyMartel.

Get real-time rate quotes with Bankrate's Mortgage app.

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8 Comments
Holden Lewis
March 03, 2014 at 10:06 am

325 counties would be a long list. Here's RealtyTrac's survey.

maria
March 02, 2014 at 7:38 pm

This has happened to my husband and I . We now cannot take the risk of losing our house so we have put it up for sale. We are using the equity to downsize and buy a house with cash is a different state.

Irma Pratt
March 02, 2014 at 5:04 pm

Okay, so where are these counties located because where I live, a mortgage of $865/month would be a steal for a three bedroom home. What poor journalism. What ever happened to the standard of who, what, where when and why in journalistic reporting ?

Jim Jones
March 02, 2014 at 1:42 pm

Had the gov. stayed out of the housing problems a few years ago we would not be in this mess again. Low rates and investors scoffing up homes also helped fuel the quick increases. A bubble is on the way again and the gov. is once again behind it.

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