According to the National Association of Realtors (NAR), housing affordability is slipping. Due to increases in home prices and rising mortgage rates, affordability for the month and for the year are both down.
As the median price for a single family home rose 4.9 percent over the last year to $213,6000, affordability continues to decline, but as price gains have slowed their pace in recent months, diminishing affordability will likely follow suit.
NAR Research Assistant, Michael Hyman notes that “while jobs and income levels are up slightly from last year, they are not growing fast enough to offset price increases. Having money for a down payment can still be a big hurdle for potential home buyers who already pay comparable rent payments.”
Affordability is falling the fastest down South and West
Although affordability in May fell in all regions, some areas were hit harder than others.
Compared to April, the South saw the biggest dip in affordability, but for the year, the West saw the biggest decrease in affordability, which NAR notes is a result of having the largest price gain at 8.4 percent.
NAR points out the silver lining
Rents have hit a five year high, and housing completions are low, which NAR points out incentivizes potential home buyers to jump into the market. It should be noted that lending remains tight and mortgage rates continue to rise, but for those that can qualify, waiting appears to be a less favorable option.
This data can and should be used by agents and brokers in the field to explain why waiting is not best for everyone, and should also be used to be honest in the fact that not everyone can or should qualify for a loan under current conditions.
Watch for affordability to continue falling, but at a less accelerated pace than in the past 12 months, and watch for more brokerages to push the “now is the best time to buy” mantra despite the phrase becoming unpopular due to its overuse leading up to the housing crash (and despite conditions not being favorable to all potential buyers or sellers).