Housing affordability has plummeted by nearly half since the days of ultra-low interest rates in 2021, and the median family is already $9,000 short of the income needed to purchase the median existing home, CNBC reports. Mortgage rates, which have reached a 23-year high, have pushed another 5 million U.S. families below the qualification standard for a $400,000 loan.
According to Moody's Analytics chief economist Mark Zandi, in order for affordability to return to normal, the mortgage rate needs to fall to 5.5%, median home prices must decline by 22%, or median incomes must increase by 28%, or there needs to be a combination of these factors in play. But with mortgage rates currently at around 8%, affordability continues to face headwinds.
Downward pressure on home prices would help, but it does not look like they will decline by much. And even if home prices do the decline, that trend won’t be sustainable unless America builds millions of more homes.
After prices surged from 2019 through early 2022, it was easy to assume a big price correction coming, but it hasn’t happened. In most markets, prices have even begun to turn up a little bit. According to the realtors’ association, the median price of an existing home dropped by more than $35,000 in late 2022 but has risen by $45,000 since its low in January.
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