First-time Texas homebuyers need $10,000 more income to buy $229,000 house

Staff Reports

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.