America’s affordable housing crisis has reached a new milestone

TRD New York TRD WEEKEND EDITION /
Feb.February 19, 2017 10:45 AM
 

The affordable-housing crunch worsened last year. In the final quarter of last year, Americans spent the highest share of their incomes on mortgage payments since 2010, according Zillow. The economy’s improvement after the housing crash generated new buyer demand for housing, even though the homeownership rateremained historically low.

Simultaneously, incomes rose slowly, and affordable housing inventory — especially in populous cities — did not match the demand. This combination inevitably drove home values higher.

And as of late 2016, affordability worsened further as interest rates began their post-election climb from historic lows.

 

Zillow estimated that a typical homebuyer could expect to pay 15.8% of their income on a mortgage at the end of 2016, the highest share since 2010. California was home to the markets where the highest shares of income were used to pay mortgages: Los Angeles, San Jose, and San Francisco.

“Nationally, mortgage rates still have room to grow before the share of income needed to pay the median monthly mortgage reaches the historical average, but many more expensive coastal markets are either close to or have exceeded what has been considered historically affordable,” Gudell said in a report released on Thursday February 16.

The Bankrate.com 30-year fixed national average mortgage rate on election day was 3.53%. On Friday February 17, it was at 4.04%, according to Bloomberg.

Post-election, the expectation for higher rates pushed some prospective buyers into the market to lock in lower rates, contributing to a further increase in home prices.

“As mortgage rates rise, buyers will face higher financing costs and already expensive homes will come with even higher monthly mortgage payments,” Gudell said.

There may not be much to constrain the rise in home values. Economists expect the Federal Reserve to raise interest rates slowly, and so overall borrowing costs could remain historically attractive for some time, providing demand.

On the supply side, existing homeowners that declined to move to avoid higher rates may continue to stay put. The National Association of Homebuilders said in January that existing inventory fell for a 19th straight month in December. If demand falls because rates are rising, inventory may not rise at a fast-enough pace to cool home prices.

In most major markets, home-value growth contributed more to higher mortgage payments than interest rates did, according to Zillow.


Related Articles

arrow_forward_ios
A rendering of 165 Broome Street (Credit: Handel Architects)

Nonprofit plans affordable housing development near Essex Crossing

Nonprofit plans affordable housing development near Essex Crossing
All Falls Down: Kanye West’s “Star Wars”-themed affordable housing plan hits snag

All Falls Down: Kanye West’s “Star Wars”-themed affordable housing plan hits snag

All Falls Down: Kanye West’s “Star Wars”-themed affordable housing plan hits snag
A new study found that almost nine in 10 households have paid at least some rent in May (Credit: iStock)

Almost 90% of renters have made payments in May: report

Almost 90% of renters have made payments in May: report
Mayor Bill de Blasio (Credit: Getty Images)

De Blasio proposes big cuts to affordable housing budget

De Blasio proposes big cuts to affordable housing budget
CHIP's Jay Martin 

“The landlord is just a collection agent for the city,” CHIP head argues

“The landlord is just a collection agent for the city,” CHIP head argues
(Credit: iStock)

Analysis: As coronavirus spreads, here are all the active hot water violations in NYC

Analysis: As coronavirus spreads, here are all the active hot water violations in NYC
From left: Joe Biden, Elizabeth Warren, Michael Bloomberg, Bernie Sanders and Amy Klobuchar (Credit: Getty Images)

Here’s how Bernie, Biden and the remaining presidential candidates would tackle housing crisis

Here’s how Bernie, Biden and the remaining presidential candidates would tackle housing crisis
From left: Former New York City Mayor Mike Bloomberg, former South Bend, Indiana Mayor Pete Buttigieg, Sen. Elizabeth Warren, Sen. Bernie Sanders, former Vice President Joe Biden and Sen. Amy Klobuchar (Photo by Win McNamee/Getty Images)

Candidates talk housing issues at Democratic debate

Candidates talk housing issues at Democratic debate
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...