As housing affordability across the country continues to decline, Americans are losing their home buying power with less market turnover, higher mortgage rates, and record home prices, MarketWatch reports.
Increasing mortgage rates suggest that the economy is rebounding after the pandemic, meaning a potential rise in household income making it easier for unsuccessful buyers to finally find their homes.
The latest edition of the monthly Real House Price Index from title insurance company First American Financial Corp. FAF, 1.49% 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.
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