Mortgage

Affordability sunk to a 2008 low as rates, prices jumped

Affordability sunk to a 2008 low as rates, prices jumped
Written by Publishing Team

The gap between home prices and the ability to buy a home with finance is wider than it has been in 13 years, according to the first US Home Price Index report for the month of October.

The index, which measures the relative values ​​of housing based on wage and mortgage rates, found that “real” prices rose 19.6% over the past 12 months, compared to a 3.6% increase in income nationally. Real home prices rose 3.7% during the month of October. The average mortgage rate for October was 3.1%, up from 2.9% in September and 2.8% a year ago. A year ago, the value of the RHPI was also rising but not nearly as fast. At the time, it was up just 1.7% from the previous 12 months.

“Affordability fell to its lowest level since 2008 in October,” Mark Fleming, chief economist at First American, said in a press release.

If, despite the latter The rate decrease associated with the variable, affordability is getting worse and buyers are being sidelined ‘on the margins’, and homebuyers may see further increase Cuts in bidding wars And moderation in prices, but still a lot depends on supply and the price of homes for sale or rent.

“The challenge for home buyers in 2022 will reverse 2020 and 2021 — you can’t buy what isn’t for sale, even if you can afford it,” Mark Fleming, chief economist at First American, said in a press release.

Some markets may experience more pressures on affordability than others.

The RHPI rose more than 30% year over year in October in cities such as Phoenix (33.7%), Charlotte (32.3%) and Tampa (30.9%). In line with these numbers, the states with the largest 12-month adjusted price gains were Arizona (32.7%), Florida (25.9%) and South Carolina (25.9%).

A combination of strong investor activity, internal migration to the region and limited inventory led to the extraordinary increase in Phoenix, according to First American. In Charlotte, a slight decline in average income has put pressure on affordability. Nominal home price gains in Tampa were higher than Charlotte’s, but taking wage growth in the latter city into account, its relatively 12-month growth as measured on the RHI was slightly lower.

“Ultimately, the higher nominal home price outweighed any increase in affordability from home buying power in all three of these markets,” Fleming said.

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