The median (median is the statistical middle point) home sales price within the U.S. in March 2022 was $405,000. Interest rates are up to 4.72% now. If the average buyer puts down about 10% and pays private mortgage insurance and you put all those things together you have a median mortgage of $2,602 monthly (plus repairs).
Using the rule of economics that says housing should be no more than 30% of your gross monthly income, we would need a gross monthly income of $8,673 to support that payment. Only 32% of households meet that threshold in the United States, currently. Considering many of them are likely already in a home and not shopping, that’s not enough buyers to keep that demand high.
With suppressed interest rates, homes being seen as investment tools and speculation; many believe house prices are artificially high. Regardless, the above indicates clearly why we have an affordable housing crisis.
When we have primary homes that also have secondary units, the rental income makes a significant difference. For example, $1,000 of monthly rental income pays a third of the primary mortgage in our illustration above. This is a game changer. It gives needed rental units in our neighborhoods, and the ability of more moderately income-d people the ability to own.
