Texas Border Business
COLLEGE STATION, Texas – (Texas Real Estate Research Center) – Rising mortgage interest rates continue to push potential buyers, particularly first-time buyers, out of the market for homeownership, says the affordable housing expert for the Texas Real Estate Research Center (TRERC) at Texas A&M University.
“As mortgage interest rates increase, the total monthly mortgage payment also increases,” said Dr. Clare Losey, assistant research economist for TRERC. “This increases the required income to qualify for a mortgage loan. In other words, as mortgage interest rates increase, purchasing power declines, and households must earn more money to purchase the same-priced home.”
At the start of 2022, the 30-year fixed-rate mortgage average in the U.S. hovered around 3 percent, according to Freddie Mac. By May 19, the average rate had jumped more than 2 percentage points to 5.25 percent.
“In the first quarter, the required income to qualify for a mortgage loan at a rate of 3 percent amounted to $59,665 for the first-quartile Texas sales price of $229,000. The first-quartile sales price generally reflects the home price affordable to first-time buyers,” said Losey.
The required qualifying income increased more than $10,000 to $70,891 at a rate of 5.5 percent. She estimates only 30 percent of Texas renters—i.e., potential first-time buyers—could afford the state’s first-quartile sales price at 5.5 percent. This is a decline of nearly 10 percentage points from the estimated 38.9 percent of Texas renters who could afford the state’s first-quartile sales price at a rate of 3 percent.
For more information, see the Center’s new Texas Housing Affordability Outlook report.
Funded primarily by Texas real estate license fees, the Texas Real Estate Research Center was created by the state legislature to meet the needs of many audiences, including the real estate industry, instructors, researchers, and the public.
