Wealthion · Thursday, July 30, 2026
Ivy Zelman highlights a significant affordability challenge for first-time homebuyers, noting that the monthly payment as a percentage of gross income is at its highest since the early 1980s. She explains that even with builders offering mortgage rate buy-downs, many buyers struggle to qualify due to high debt-to-income ratios, with back-end ratios often exceeding 50%.
“And we think about affordability like a consumer would. Like how much of my wallet do I need to pay towards my monthly payment. And we've included homeowners insurance and property taxes. And we've gone back like 1975. And when you look at the monthly payment as a percentage of gross income for entry level home, median priced home, um, for existing homes and their non-supervisory employees, we're looking at affordability that has not been this stretched since the early '80s when we had mortgage rates and the high teens.”
“So that's the problem. It's not just limited to a mortgage rate. And I think if mortgage rates were to go up another 50 basis points, you use the, uh, formula that for every 25 basis points increase in rates, that equates to roughly a 3% increase in home price or monthly payment.”
“Because two things, they have too much debt, or they don't have the down payment. Or, you know, what's called a back end ratio, which is your front end ratio, is just your mortgage payment. Back end ratio includes your mortgage payment and your car payment, and a lot of them have debt to income ratios on the back end that could be over 50%.”