According to the National Association of REALTORS, housing affordability fell for the second straight month to 166.7 in March due to the median home value rising for the second straight month.
Housing affordability, much like housing inventory or the month's supply of housing, is best understood in the context of the year over year changes. The reason for this is because real estate is seasonal, median home values can fluctuate from month to month and as a result, the affordability index can be sensitive to this.
What is relevant about this NAR index which measures the relationship between median home values, mortgage rates, and median family income is that their report is showing that the median family income has fallen from $62,483 last year to $61,056 this year. And so while home values have fallen and mortgage rates are at historic lows, the fact that incomes are down and the real unemployment is currently sitting at 15.8%, makes home sales resistant to the affordability argument.
Simply waiting for housing to become more affordable while at the same time plunging more than 15 million American's into negative equity, or waiting for the Fed to purchase another $1 trillion in mortgage paper is not a viable housing stimulus plan. Home sales, both new and existing, remain very weak in spite of record housing affordability.
Comments(4)