02/09/24 09:24 AM EST

US Housing Affordability Crisis

Below is a chart and brief excerpt from today’s Market Situation Report written by Tier 1 Alpha. If you’re interested in learning more about the Hedgeye-Tier 1 Alpha partnership, there’s more information here.

By the close of Q4 2022, the average sales price for new homes in the U.S. reached $479,500; the median sales price has adjusted lower to $417,000. Despite this downturn in prices, the affordability crisis remains unresolved.

As Q4 2022 ended, mortgage rates were at 7%, translating to a monthly mortgage obligation of $3,100 for buyers assuming an FHA-aided 3% down payment. With current mortgage rates closer to 7.5%, the situation barely improves with a median price of $417,000, but remains well above pre-pandemic levels.

For a $417,000 home, accounting for a 3% down payment and a 7% interest rate over 30 years, the basic monthly mortgage payment is roughly $2,700. Figure a 1% home property tax, 2% maintenance (new home) and 0.75% home insurance and you're out $48,000 a year for this new home.

Using online mortgage calculators, our required income to buy this new home at $417,000 is roughly $126,500 with no other debts:

For the older millennial, looking to buy their first house around 35 years, this seems challenging as 15% of millennial households exceed this threshold:

This dire scenario elucidates why there's an uptick in multigenerational living arrangements and a burgeoning sense of disillusionment toward the prospect of first-time homeownership.

Learn more about the Market Situation Report written by Tier 1 Alpha.