Housing affordability plummets at fastest clip ever

Data: FactSet; Graphic: Erin Davis/Axios Visuals

Soaring house prices and mortgage rates have reduced housing affordability by 29% over the past year, according to measures from the National Association of Realtors.

  • This is the largest year-over-year decline in affordability on record.

Why is this important: 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 released yesterday shows that the monthly principal and interest payment on an average-priced home, by a buyer putting 20% ​​down, has increased by about $600 — 44% — since the beginning of the year.

How it works: The decline in accessibility is due to two factors.

  • Rising house prices: A popular indicator of house prices known as the Case-Shiller index showed that house prices posted their biggest year-over-year increase in March, when they rose 20.6%.
  • Rising Mortgage Rates: Over the past year, the rate on a conventional 30-year fixed rate mortgage has risen from 3% to over 5%.

What they say : “Given the affordability collapse in 2022, these [home price appreciation] the levels are likely at or near the highs of this cycle. The key question is how much and how fast they will fall,” Bank of America analysts wrote in a research note released Friday.

Editor’s note: Title corrected to show housing affordability dropping at fastest clip ever.

Comments are closed.