Source: Investing.com —
The U.S. housing market is currently the least affordable in at least 25 years.
Affordability is, generically, the ratio of monthly income vs. the median price of a home. Essentially the degree to which a potential home buyer can afford the basic monthly payments on a home. Here’s another way to look at affordability in terms of the monthly cost (mortgage, taxes, insurance) to buy a house:
Currently, the average house payment is $2,503 per month. This is nearly double the amount at the beginning of 2021. Note that this does not include the cost of maintenance, HOA dues, utilities, etc. In many markets, it’s now much cheaper to rent than to buy.
The mortgage purchase applications index took another hit for the week ended Feb. 24, falling 5.6% from the prior week. The index is down 45% from a year ago and is at its lowest level since 1995. The base 30-year fixed rate mortgage rose to 6.71%, its highest since mid-November. Keep in mind the “base” rate is for an agency-guaranteed (conforming) mortgage with 20% down and at least a 740 FICO. For most potential homebuyers, the mortgage rate is well over 7%.
The pending homes index for January jumped 8.1% vs. December on a seasonally adjusted, annualized rate basis, though it dropped 24.1% YoY. December was revised lower to +1.1% vs. November from the +2.5% originally reported. This is unsurprising given the big bounce in mortgage purchase applications during January.
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