Since 2020, mortgage payments have increased by 92% in battleground states. (iStock )
Rising home prices are hitting hard in battleground states where either candidate could win, and home affordability is a particular focus in the next election, where 9 in 10 adults say home prices are important when deciding who to vote for. Found Realtor.com.
Mortgage payments in battleground states have nearly doubled since the last election, rising 92% on average to $2,161. Rising home prices and mortgage interest rates are contributing greatly to this sharp increase in the cost of ownership. The average sales price in battleground states has increased about 40% since 2020 and is expected to be just over $316,000 in 2024. Mortgage rates have more than doubled to about 7% from the beginning of 2021, when they averaged 2.65%.
Republican and Democratic states faced similar fates, but Republican states fared slightly worse, with median mortgage payments increasing by 95%. In Democratic states, average mortgage payments increased by 83%, according to Realtor.com.
These rising housing costs have put the median-priced home out of reach for many residents of battleground states, based on the general rule that households should not spend more than 30 percent of their income on housing.
To cover the monthly costs of homeownership in battleground states, the median household income would need to be $86,421 to meet the 30% rule. Just four years ago, the income needed in these states was just over $45,000. For reference, a median-income household in a battleground state would need to spend 32.8% of their income today to comfortably purchase a home, compared to 21.8% in 2020.
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Low-income families struggle the most in battleground states
Housing costs have become prohibitive for many families in battleground states, and low-income households and certain social groups are suffering the most from rising housing costs, as income growth has not kept pace with the rapid rise in home prices.
“Battleground voters are concerned about home affordability as rising home prices, mortgage rates and a shortage of homes for sale make homeownership feel impossible for some Americans. This is especially true for younger people who have lower incomes and haven’t yet built up savings, making it harder for them to reach the same level of financial success as their parents,” said Elijah de la Campa, senior economist at Redfin.
“Battleground states have historically had lower home prices than Democratic-leaning states, and most still do, but their housing markets are not immune to the rising home prices the nation has faced over the past few years. The difficulty in affordability has made many voters anxious about the economy and financial outlook,” de la Campa said.
Black and Hispanic households in particular face challenges securing affordable housing: The average Black household in battleground states will have to spend 48.2% of their income to purchase a typical home, while the typical Hispanic family will have to spend 38.3% of their income — rates that have increased for both groups compared to 2020.
By comparison, white families would realistically need to allocate just 29.8% of their monthly income toward a home purchase to realistically afford it, below the 30% spending threshold recommended by experts — but still higher than the 19.8% needed in 2020.
If you’re considering buying a home, consider visiting Credible to find the best mortgage rate for your financial situation.
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A rate cut is expected this year
A rate cut is expected in September following reports that inflation is subsiding. The Federal Reserve has held off on lowering interest rates until the economy shows signs of a more robust recovery, which means inflation is falling. This holdoff has pushed mortgage rates higher, where they have remained in the 7% range for nearly a year.
In anticipation of the rate cut, mortgage rates have fallen in recent weeks, recently reaching 6.78%. While interest rate cuts are generally welcome, Experts are divided How much lower mortgage rates could fall if the Federal Reserve chooses to cut rates in September.
Many believe interest rates will not fall as much as homebuyers would like. In fact, the initial rate cuts may have little impact on mortgage rates. Assuming the Fed continues to cut rates through this year and into 2025, buyers will see further declines in interest rates.
Still, lower interest rates could boost home sales, as buyers have been waiting a long time for them to come down.
Consumers who want to see what loan term and interest rate is right for them can use Credible’s free online tool.
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