Surging home prices and mortgage rates cut housing affordability by 29% over the last year, as measured by the National Association of Realtors.
- It’s the sharpest year-over-year decline in affordability on record.
Why it matters: The cost of housing is a major source of irritation for the American public after two years of pandemic restrictions and persistent inflation.
A separate report from housing market research firm Black Knight published yesterday shows that the monthly principal and interest payment on an average-priced home, by a buyer who puts 20% down, has gone up by roughly $600 —44% — since the start of the year.
How it works: The drop in affordability is being driven by two components.
- Surging house prices: One popular gauge of home prices known as the Case-Shiller index showed home prices posting their biggest ever year-on-year gain in March when they rose 20.6%.
- Surging mortgage rates: Over the last year, the rate for a conventional 30-year fixed-rate mortgage has jumped from 3% to more than 5%.
What they’re saying:Â “Given 2022’s affordability collapse, these [home price appreciation] levels likely are at or near the peaks for this cycle. Key question is how much and how quickly they will decline,” Bank of America analysts wrote in a research note published on Friday.
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axios.com