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‘Housing affordability plunges’

Higher income, backed up by lower mortgage rates, has expanded the financial reach of the average homebuyer. However, an increased demand for homes has concurrently driven up prices, negating two of the three main factors in the index, First American said in a press release.  

Boston real estate and lower mortgage rates

“Lower mortgage rates and higher household income compared with one year ago propelled an 11% increase in house-buying power. However, surging house-buying power drives demand, and rising demand in a supply constrained market accelerates nominal house price appreciation,” chief economist Mark Fleming said. “In March, the final component of the RHPI, nominal house prices, appreciated at its fastest annual pace since 2005, 14.8%, wiping out any affordability boost from rising house-buying power.  

First American’s index measures the price changes of single-family properties adjusted for the impact of income and interest rates on consumer homebuying power at national, state and metropolitan levels.  

Geographically, the drop in affordability was widespread, according to First American.  

The five markets with the greatest year-over-year declines in affordability were Kansas City, Mo.; Phoenix; Tampa, Fla.; Seattle; and Austin, Texas.  

“In March, Kansas City had the greatest year-over-year decrease in affordability, mostly due to the 4.3% annual decline in household income and a 16.5% increase in nominal house prices compared with a year ago,” Fleming said. “Phoenix and Tampa both had even faster nominal house price appreciation than Kansas City, but household incomes held steady in both markets, so the relative affordability loss was less than in Kansas City. Seattle and Austin faced both faster nominal house price growth and lower household income, fueling declines in affordability in both cities.” 

Downtown Boston real estate for sale 

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It feels strange to write about Boston condos for sale affordability during a pandemic with high unemployment.  Even though mortgage rates are down the cost of housing is outpacing wage growth.

According to the National Association of Realtors affordability has declines which is a kind of backward way of saying the housing is less affordable:

“Affordability is down in two of the four regions from last month. The South had a gain of 1.8% followed by the Midwest with an incline of 2.3%. The Northeast had a decline of 1.1% followed by the West with a dip of 2.3%.”

Housing. Regionally, the West has the highest mortgage payment to income share at 20.9% of income. The Northeast had the second highest share at 15.0% followed by the South with their share at 14.7%. 

Housing costs as a percentage of income *

Boston real estate

Boston real estate

*The chart is a screen print from the National Association of Realtors website.

Filed under: Making do

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Updated:  Real Estate Fall/Winter 2021

Downtown Boston real estate for sale 

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