The double-whammy of spiraling home prices and increasing mortgage-interest rates means that a buyer in Virginia would need an income 71 percent higher now to affordable a typical property than that same buyer would have needed just 24 months ago.
The Virginia Realtors trade group has parsed the figures and come up with an estimated income of $95,915 needed to purchase a home at the Virginia median sales price in May of $401,000, with a typical 5.81-percent, 30-year-fixed mortgage.
That estimated income needed to afford a home – well in excess of Virginia’s median income – is up from the $56,015 in May 2020, when the median home-sales price was $315,000 and the average mortgage rate was 3.28 percent, according to figures compiled by Virginia Realtors.
In May 2021, the median sales price had risen to $369,000 but the average interest rate had dropped to 2.94 percent, requiring an estimated income of $62,872 to afford a property without exceeding the standard benchmark of 28 percent of gross family income.
(The figures assume a 5-percent down payment, 1.5 percent in closing costs and a 30-year, fixed-rate loan.)
“It’s been a competitive market for prospective buyers for years, but conditions have become much more challenging recently,” said Ryan Price, chief economist for Virginia Realtors.
“The estimated monthly payment has skyrocketed up by about $770 since May 2021. This will likely leave many buyers on the sidelines, and there is little indication that prices will fall,” Price said.
In May 2021, the estimated family income needed for a typical home purchase of $56,015 compared to a median Virginia household income of $76,398.
Median household incomes had been above the estimated income needed to purchase a typical home since at least 2017 and likely well before.
Median household incomes in Virginia for 2021 has yet to be reported by the U.S. Census Bureau, but is likely to have been above the $62,872 typical income needed for a home purchase. But with that amount needed to afford a home spiking to nearly $100,000 under current conditions, it appears incomes, though rising, will not rise fast enough to keep pace.