US Housing Affordability in June Was the Worst Since 1989

From [HERE] It was more expensive to buy a U.S. home in June than it has been for any month in more than three decades, as record-high home prices collided with a surge in mortgage rates.

The National Association of Realtors’ housing-affordability index, which factors in family incomes, mortgage rates and the sales price for existing single-family homes, fell to 98.5 in June, the association said Friday. That marked the lowest level since June 1989, when the index stood at 98.3.

Existing-home sales have declined for five straight months. During that period, interest rates shot up while home prices steadily climbed, leading to the sharpest erosion of affordability for the U.S. housing market in years and pricing more buyers out of the market. Even with fewer transactions, prices continue to rise from a year ago because the number of homes for sale around the U.S. remains below historical levels.

The drop in affordability makes it especially hard for first-time buyers to enter the market and access the main path for the U.S. middle class to build wealth. First-time buyers typically need to save up for a down payment and can’t benefit from selling a previous home.

Conditions have eased a bit in recent weeks. Mortgage rates hit a 13-year high in June but have ticked lower since. Some sidelined buyers re-entered the market in July and August, according to real-estate agents.

“Thankfully, the worst in affordability could already be over for this cycle,” said Lawrence Yun, NAR’s chief economist. “Mortgage rates have calmed down in recent weeks, and the consistent wage growth ... is narrowing the gap with home-price growth.”

Existing-home prices have jumped 46% nationally in the past three years, according to NAR, fueled for much of that period by buyers seeking more space during the pandemic. Still, home buying remained relatively affordable in 2020 and 2021 because mortgage rates dropped to record lows, offsetting much of the price increases for buyers. [MORE]