HOME AFFORDABILITY is finally taking a hit now that mortgage rates have ticked higher. Last May, I wrote that property prices were through the roof but homes were still affordable. The reason: Historically low borrowing rates, coupled with record high median family income, had offset robust home prices.
The National Association of Realtors’ latest figures show housing affordability rivals that of last May. But the figures don’t yet reflect higher interest rates. Freddie Mac posts the latest set of mortgage rates each Thursday. The most recent data show that the average 30-year fixed-rate mortgage has surged from 2.77% last August to 3.55% for the week ending Jan. 27. Similarly, 15-year fixed-rate mortgages have jumped 0.7 percentage point since August.
Meanwhile, the most recent S&P CoreLogic Case-Shiller National Home Price Index shows that real estate prices continue to rise sharply, up 18.8% in the year through November. Zillow’s price index, which was updated Dec. 31, indicates that the median home value is now $320,662, up 19.6% from a year earlier.
On the income front, families might have tighter purse strings this year, since further stimulus payments are unlikely. Recall that in 2021 stimulus checks were doled out to low- and middle-income individuals and families in January and March. Enhanced child tax credits also boosted checking accounts. In January, for the first time in six months, families didn’t receive those payments.
All these factors should result in worse home affordability readings from the National Association of Realtors. Housing, it seems, might finally be out of reach for some prospective buyers.