America’s 40-year housing market ‘tailwind’ could be coming to an end — with rising mortgage rates and worsening affordability As home prices continue to grow — albeit at a slower pace — Americans are set to see their purchasing power shrink. And unlike in the past, they won’t be able to rely on falling mortgage rates to bail them out.
The latest edition of the monthly Real House Price Index from title insurance company First American Financial Corp. FAF, -0.48% showed that housing affordability declined 16.6% over the past year as of August. The report takes into account changes in household income, mortgage rates and nominal home prices when calculating affordability.
In August, nominal home prices rose 20.7% from the previous year, marking the third straight month in which nominal house price appreciation was at a record high. That outweighed the 3.5% increase in home-buying power, due to lower mortgage rates and improved income.
Even though affordability has worsened, when home prices are adjusted to reflect Americans home buying power, they still remain 37.5% below the 2006 peak during the last housing boom.
But an emerging shift in the housing market could make it much harder for people to be able to buy homes. As First American chief economist Mark Fleming noted in the report, since the 1980s the average rate for the 30-year fixed-rate mortgage has trended downwards. He described that trend as “one of the most important driving forces of both purchase and refinance activity for the last 40 years.”........
https://www.marketwatch.com/story/americas-40-year-housing-market-tailwind-could-be-coming-to-an-end-with-rising-mortgage-rates-and-worsening-affordability-11635354283?mod=home-page
