As Mortgage Rates Jump Again, Can You Afford a Home?

Mortgage rates are rising, and homes are becoming increasingly unaffordable. But Gen Z has popularized a solution: buy a home with your sibling. Splitting the down payment and mortgage with your sister might just be a great alternative to breaking the bank while going it alone. An amazing 22-30% of Gen Z home buyers are co-purchasing a home with a sibling. This percentage is way up from just 4% in 2023. Though not everyone’s perfect lifestyle involves living with family, splitting the fees with sis may be preferable to going into massive debt in the name of mortgage payments.

Regardless of your sibling’s buying potential, the housing market looks grim. One of the primary issues over the past four years is the sharp rise in mortgage interest rates. After it appeared these rates were trending downward, something changed. This is a new worry that America’s inflationary period has not ended. The recent strong jobs report steered inflation anxiety higher. Suddenly, mortgage ratings moved to their highest level since July. The number jumped to 6.93% for a 30-year fixed. The question emerges again. How many Americans can actually afford a mortgage? The answer is fewer and fewer. You may be among them.

The average mortgage rate fell to 2.96% in 2021. This, in turn, helped stimulate the real estate market. A 3% mortgage on a $450,000 house drove a monthly payment of $1,925. When rates moved to 7%, the monthly payment rose to $2,923, according to the National Association of Home Builders. One byproduct of this was that people with low mortgage rates decided not to sell their houses. Their low payments were simply too attractive.

Americans turned to renting, as potential buyers waited for mortgage rates to drop. A third of people rented homes and apartments in 2024. About half of potential first-time homeowners believe they cannot afford to purchase a home. Among the solutions to this is people who have saved tens of thousands for down payments. However, to drop monthly payments, a down payment would need to rise to 30% to 40%.

Under normal circumstances, the income needed to buy a home is not only based on monthly payments. People need to come up with down payments, which are usually 20%. They also need to cover property taxes and insurance. Usually, renters do not have this problem.

Owning a home in the United States requires an income of well over $110,000 at current mortgage rates. Most of the balance of potential buyers will need to wait until their incomes rise, or mortgages come down. Right now, for these people, rates are moving in the wrong direction.

This Is How Much You Need to Make to Comfortably Afford a $1 Million Home

This post was updated on June 10, 2025 to include the new statistics on Gen Z home buyers.

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