The cost of a monthly mortgage payment for a typical U.S. home has NEARLY DOUBLED in just four years

 Real estate firm Zillow has reported that, since January 2020, the monthly mortgage payment on a typical home in the United States has nearly doubled – with monthly payments up by 96 percent in just four years.

A typical buyer now pays nearly $2,200 a month, with a 10 percent down payment on a house. This means that home ownership in the U.S. now costs well above the 30 percent of median income that was once thought to equate to an "affordable" cost for housing in America.

The situation is made worse by the fact that the 30-year fixed-rate mortgage is hovering around seven percent. Zillow Senior Economist Orphe Divounguy noted that, with prices rising by leaps and bounds, homeowners can make a killing by selling their homes. But it is not a great time for homebuyers.  

"After the surge in home buying demand and mobility during the pandemic, and the doubling of mortgage rates, home shoppers now need to earn $106,000 to afford the median home in the United States," said Divounguy.

In 2020, the salary needed to afford the median monthly mortgage payment was just $59,000. Now, home buyers need 80 percent more income to purchase a home. Israel Hills, a real estate broker, has seen the affordability crunch in person in Portland, Oregon.

"There’s nowhere to go, right? I mean, the prices aren’t dropping because there's no inventory," said Hill.

With mortgage rates around seven percent, many homeowners don’t want to sell and give up their cheaper mortgages. So, for would-be buyers, "there’s a sticker shock, for sure, trying to figure out how they’re going to make that monthly payment. And some people have to put themselves on the sidelines," added Hill. 

"Half of first-time homebuyers are getting help from family and friends to at least get the down payment, 21 percent of last year's buyers reported co-buying, so they’re buying with a friend or family member," said Divounguy.

Wages not rising in tandem with monthly mortgage rates and home values

Home values have also increased over 42 percent in the last four years, with the typical home nationwide worth roughly $343,000.

While costs have increased, wages have not. In 2020, a household income of $59,000 a year "could comfortably afford the monthly mortgage on a typical U.S. home, spending no more than 30 percent of its income with a 10 percent down payment," the report noted. "That was below the U.S. median income of about $66,000, meaning more than half of American households had the financial means to afford homeownership."

Four years later that analysis no longer holds. Today, roughly $106,500 is needed to comfortably afford a mortgage payment – well above what a typical U.S. household earns each year, estimated at about $81,000.

Fortunately, the news is not all doom and gloom. Eddie Seiler, an operations manager at the Mortgage Bankers Association, noted that interest rates should come down steadily.

"Hopefully, we'll end the year at around six percent," said Seiler, who expects that mortgage rates and the inflation of home prices should slow down along with the Federal Reserve's expected rate decreases.

Guy Cecala at Inside Mortgage Finance, points out that in the years before the pandemic, consumers got used to really low mortgage rates.

"Unfortunately, a lot of people felt that was normal, and that anything above that they should just wait until they go back to the three and a-half, four percent range. And that is not a realistic expectation," said Cecala.

Cecala says mortgage rates have historically hovered around five to six percent in a healthy economy, and homebuyers will just need to get used to that.

In seven major housing markets, a minimum household income of $200,000 is needed to comfortably afford a typical home, the report noted.