Housing Affordability Flagging Fast in 2018

April 16, 2018
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Photo: Unsplash/Marko Kovic

Researchers at Arch Mortgage Insurance are estimating that affordability will thin out this year at the fastest pace in 25 years. Average mortgage payments went up 5 percent in Q1 2018, and may go up another 10 to 15 percent by year's end. 

Home prices, interest rates, and buyer demand, are all on the rise, while housing availability is shrinking. To get into the market, many buyers are taking on more debt to afford a home. According to CNBC's Diana Olick, in the last half of 2017, mortgage loan borrowers with more than 45 percent of their monthly gross income going toward debt payments more than tripled. She adds that buyer demand was "waiting" when Fannie Mae raised that debt-to-income threshold to 50 percent.

In any case, the more homebuyers stretch, the more house-poor they become, and the less money they have to spend in the rest of the economy. With no relief in either inventory or home price appreciation in sight, the housing market is likely to become even more competitive this year. At some point, however, there will come a breaking point when sales slow, which is already beginning to happen in some cities.

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