Weekly Special | November 26, 2018

The Double Whammy On Home Affordability

Buyers are facing a double whammy in the housing market that is working to decrease home affordability, and it is not going to go away anytime soon. In fact, this is very likely the start of a 30+ year trend!

First of all is the rising cost of construction which has driven the median home price to an all-time high. The graph above shows that the median home price of $190,100 is nearly 3% higher than the median price from last year which had also set a new high.

The second hit to home affordability is the rise in mortgage interest rates, up nearly a full percent since this same time last year. This means that the change in the interest rates charged to homebuyers has moved a whopping 24% in just twelve months!

Buyers Have Sticker Shock Buyers must get accustomed to higher prices and a higher cost of borrowing money, as neither is going away. We continue monitoring the supply of homes for sale in order to warn of another housing bubble, but no bubble is in sight.

The inventory of homes remains just below 4.0 months of supply, a level that suggests most homeowners will enjoy a seller’s market when it comes time to move. Sticker shock will slow the market, but not so much that it will impede rising home prices for buyers.

The original one-page Weekly Special PDF is still available.