Is another Mortgage Crisis brewing?
Homebuyer Debt-to-Income Ratios (DTIs) are now approaching 40% in the beginning of 2023.
That means homebuyers are now spending 40% of their gross income on mortgage and interest costs.
Same level as 2006. 😬
(Source: FHFA)
Well yeah, this tracks. House prices have stayed largely the same but interest rates have increased drastically. So you’re getting the same amount of house for huge increase in cost. When you add in wages not keeping pace with inflation and the idea that housing demand is relatively inelastic it absolutely makes sense that people are spending a bigger chunk of less valuable money on housing.
Well yeah, this tracks. House prices have stayed largely the same but interest rates have increased drastically. So you’re getting the same amount of house for huge increase in cost. When you add in wages not keeping pace with inflation and the idea that housing demand is relatively inelastic it absolutely makes sense that people are spending a bigger chunk of less valuable money on housing.