PART 1: Is the affordable Housing problem getting better or worse? A March 4, 2024 article entitled “Home Ownership Moves Even Further Out of Reach Even as Inventory Increases” by Philippa Maister reports that Redfin estimates there are now 13 percent more homes for sale nation-wide than last year, but the typical monthly mortgage payment has reached $2,671, almost at the record high reached in October of 2023. Now roughly $106,500 in annual earnings is needed to afford a typical home when the typical US household earns about $81,000 according to Zillow.
A March 14, 2024 Globe St article entitled “Janet Yellen Says Rates Will be Higher for Longer”, by Erika Morphy reports that Janet Yellen told Bloomberg that it is unlikely that market interest rates will return to pre-pandemic levels. She said this projection was in line with private sector forecasts, The projection for the 10-year US Treasury bill yield is now 4.4 percent up from 3.6 percent.
On 3/22/2024 a Wall Street Journal article entitled “The New Normal for Mortgage Rates Will be Higher Than Many Hope” states that economists at Fannie Mae increased their forecast for average 30-year fixed mortgage rates to be 6.4 percent on average in Q4, 2024 from their prior view of 5.9 percent. They are also expecting an average rate of 6.2 percent in 2025. The weekly average at the end of Q1, 2024 was 6,87 percent.
After the Wall Street Journal had estimated that sales would fall 1.3 percent in February, 2024, sales of existing homes in February surged by 9.5 percent. The most expensive homes saw the biggest increases in sales. Homes sold for over $1 million increased 37 percent in February compared with the same month a year ago. Sales of homes priced from $750,000 to $1 million rose 23 percent. At the same time the national median existing home price rose 5.7 percent in February from a year earlier to $384,500. In my home state of Utah where the 2022 median home price was $574,000, the senior advisor for housing strategy for the state said that at least 80 percent of the non-homeowner residents of Utah cannot afford to buy a home.
With the average mortgage payment now 38 percent higher than the average monthly apartment rent and apartment rents expected to grow by 2.8 percent annually over the next five years, housing affordability for renters is also in doubt. In the single-family home (SFR) and built-to-rent (BTR) space where rentals offer the same comfort and privacy as purchased homes with fewer headaches, rent prices are much higher and growing much faster, but are still lower than paying a home mortgage, insurance and taxes in any major metro area.
This data explains why housing affordability is not getting better for the majority of US households with little relief in sight for first-time buyers and renters. First-time buyers accounted for only 26 percent of home purchases in NAR’s latest survey matching the lowest figures ever measured for that group of purchasers.