NAR Reports

Home sales could take a big hit this year as housing affordability falters [new data]

affordability homes new home sales pending

(HOUSING NEWS) Housing affordability falls and sales could take a hit, but perhaps there’s one silver lining that will keep some chins up…

Affordability conditions vary

As 2016 drew to a close, housing affordability fell, ending a four month streak of progress. According to research from the National Association of Realtors, mortgage rates rose slightly to 3.82 percent with further increases possible, and the overall housing affordability metric fell by 1.8 percent from October, signifying a decrease from the prior year as well.

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With median sales prices rising by nearly 7 percent for single family homes sold in November, with an average price of $236,500, homeowners saw a boost in their equity, but homebuyers faced a market that was still hot at the end of 2016.

The silver lining: rising equity

“In just the last four years, equity for homeowners with a mortgage has nearly doubled to $6.9 trillion,” said Frank Nothaft, chief economist at CoreLogic, speaking to CNBC.

“The rapid increase in home equity reflects the improvement in home prices, dwindling distressed borrowers and increased principal repayment,” added Nothaft. “These are all positive factors that will provide support to both household balance sheets and the overall economy.”

The Midwest remains the most affordable

Looking at the issue regionally, the Northeast US was the only region that was actually more affordable in November 2016 than it had been the prior year. The South saw a nearly double-digit gain in home prices, while home prices in the West and Midwest rose by 8.5 and 6.6 percent, respectively.

Those monthly snapshots, however, did nothing to change the fact that the Midwest region remains the most affordable housing market in the United States, while the West is the least affordable.

Interest vs. availability

Even with decreases in the housing affordability index, and increases in interest rates, mortgage applications continue to rise and housing shortages make the market tight for the homebuyer.

This indicates that there is still a great deal of interest in any property that comes to the market, but with fewer and fewer properties of interest that are both available and affordable, the challenge is on to find one that blends those two elements.

#HousingAffordability

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