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Housing is even more unaffordable than it was at the peak prior to the 2008 crisis, as mortgage rates touch 23-year highs

Jennifer Sor   

Housing is even more unaffordable than it was at the peak prior to the 2008 crisis, as mortgage rates touch 23-year highs
  • The housing market is even more unaffordable than it was prior to the 2008 mortgage crisis.
  • The Atlanta Fed's home affordability measure dropped to 69.5, even lower than its level in 2006.

The housing market is so unaffordable, that conditions are even worse than they were at the peak of the housing bubble that preceded the subprime mortgage crisis, according to the Atlanta Federal Reserve.

The Atlanta Fed's Home Ownership Affordability Monitor dropped to 69.5 in June from 70.1 in May. While the index was below 69 last September and October, the latest reading still is lower than in 2006 when housing affordability troughed at 71.5 in July of that year.

The index's current level is also 30.5 points lower than the Affordability Threshold of 100, which represents a median-income household spending 30% of its income on housing costs.

Affordability woes are largely the fault of high mortgage rates, with the average 30-year fixed mortgage rate clocking in at a 23-year high of 7.48% this week.

High rates have been huge barrier to affordability by shutting out both buyers and sellers from the market. While buyers are deterred by the high cost of borrowing, existing homeowners are looking to keep their homes at which they financed at low rates years ago, which is creating a supply shortage that's pushing up home prices.

Total housing inventory is now down 14.6% from a year ago, according to data from the National Association of Realtors. Meanwhile, home prices have hit fresh records in the majority of the US, according to a recent report from Black Knight.

Experts have said affordability is likely to stay poor through the rest of the year, as mortgage rates are heavily influenced by real interest rates in the economy, which the Fed has said will stay elevated as it continues to monitor inflation.

Rates on the 30-year fixed mortgage are expected to pull back to just 6% by the end of 2023, according to estimates from Redfin and NAR. Meanwhile, industry experts say rates would have to pull back to the 5% range to unlock more inventory and ease affordability woes for prospective buyers.




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