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Skyrocketing rates make homeownership impossible for most Americans, with $124,150 needed to afford the median home—far above the $79,223 median household income.
As of January, “qualified income” needed to afford median home in U.S. was $124,150, but U.S. median household income was $79,223 … makes for a $44,927 affordability gap per @AtlantaFed data
@DataArbor pic.twitter.com/hLA3s23L1o— Liz Ann Sonders (@LizAnnSonders) March 18, 2025
Homebuilders revive 0% down mortgages, mirroring risky pre-2008 housing crash practices
Homebuilders across the U.S. are increasingly offering zero percent down mortgages, a practice reminiscent of the lead-up to the 2008 housing collapse. This resurgence is occurring against a backdrop of challenging economic conditions, where affordability is a major concern for potential buyers.
Consider these figures: the median existing-home sales price in April 2024 hit $407,600, according to the National Association of Realtors. This high price point, combined with fluctuating interest rates, makes it difficult for many to save for a traditional down payment. According to Freddie Mac, the average 30-year fixed-rate mortgage was around 7.02% as of late May 2024. This combination of high prices and interest rates is driving the demand for zero-down options.
The availability of these mortgages is a key concern. As of April 2024, existing-home sales slipped by 1.9%, indicating a slowing market. This slowdown, coupled with the rising availability of zero-down mortgages, creates a potentially volatile situation. The Census Bureau’s New Residential Construction report for April 2024 shows that housing inventory is increasing, which could put downward pressure on home prices.
The potential for increased foreclosure rates is a significant risk. In 2008, when similar lending practices were prevalent, foreclosure rates skyrocketed, contributing to the economic crisis. If home values were to decline even slightly, homeowners with little to no equity could find themselves underwater. CoreLogic’s Home Price Insights for April 2024 indicate that while home prices are still rising, the rate of increase is slowing. This slowing rate of appreciation could be a warning sign.
The volume of these zero-down deals is a critical metric. Industry analysts are closely monitoring the percentage of new mortgages with minimal down payments. Any significant increase in this number could signal a heightened risk for the housing market.
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It's not the interest rate, the market needs a huge correction to burst this bubble. It's the outrageously inflated home prices that need to come down 75% of the current price.