First time home buyers getting priced out by interest rates

Home loans
Home loans Photo credit utah778/GettyImages
By , 1080 KRLD

According to research from the Texas Real Estate Research Center at Texas A&M, first-time Texas homebuyers are getting crunched by the rise in interest rates.

At the start of 2022, the 30-year fixed-rate mortgage average in the U.S. hovered around 3%, according to Freddie Mac. By May 19, the average rate had jumped more than 2 percentage points to 5.25%.

Here's the problem...that means Texans need about $10,000 more in income to buy a very basic, average $229,000 house.

“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.”

According to the Texas A&M research, the required income to qualify for a mortgage loan at a rate of 3% for a $229,000 house amounted to $59,665.

But at a rate of 5.5%, the required qualifying income increased more than $10,000 to $70,891.

"What that does is it pushes potential buyers, particularly potential first time buyers out of the market for home ownership," Dr. Losey said.

KRLD's John Liddle spoke in depth with Dr. Losey about the problem.

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Featured Image Photo Credit: utah778/GettyImages