America’s affordable housing crisis has reached a new milestone

TRD MIAMI /
Feb.February 20, 2017 11:15 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
Rendering of Belmont Village Coral Gables and Baptist Health South Florida CEO Brian L. Keeley

Baptist, Belmont gain approval for luxury senior living in Coral Gables

Baptist, Belmont gain approval for luxury senior living in Coral Gables
9885 Palomino Drive (Credit: Google Maps)

Resort Lifestyle Communities scores $36M construction loan for Lake Worth senior housing project

Resort Lifestyle Communities scores $36M construction loan for Lake Worth senior housing project
5010 Nob Hill Road (Credit: Google Maps)

Sunrise affordable senior housing facility sells for $30M

Sunrise affordable senior housing facility sells for $30M
Mark Zilbert

Let’s make a deal? Some resi sellers in Miami-Dade slash asking prices

Let’s make a deal? Some resi sellers in Miami-Dade slash asking prices
(Credit: iStock)

Home sales dropped big time in South Florida in April

Home sales dropped big time in South Florida in April
 Rendering of Father Marquess-Barry Apartments with Matt Rieger

HTG scores financing for senior affordable housing in Overtown

HTG scores financing for senior affordable housing in Overtown
Renderings of different versions of the project with Matt Rieger

HTG plans 1,000-unit affordable housing complex in Miami’s Overtown

HTG plans 1,000-unit affordable housing complex in Miami’s Overtown
Pharrell Williams (Credit: Ethan Miller/Getty Images)

South Florida by the numbers: Bright spots in a challenging market

South Florida by the numbers: Bright spots in a challenging market
arrow_forward_ios

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

Loading...