Perfect storm
Last week the average rate on a 30-year fixed mortgage passed 7%, compounding the misery for would-be homeowners who now face a perfect storm of higher borrowing costs and still-elevated home prices.
That combination has sent the National Association of Realtors' housing affordability index down to 95.5 in the latest quarterly figures. A reading of 100 on the index means that a median income family will have exactly enough to qualify for a mortgage on a median priced home. The data shows that this is the least affordable housing market for nearly 40 years, with a lower reading not seen since the mid 1980s.
The theory is that higher rates will cool demand, and house prices will fall — but few things translate from the textbook to reality that quickly. It may take months for sellers to realize they aren’t getting the offers they require before slashing prices, and a construction slowdown has meant that the market isn't currently flooded with new homes either.
As spring fast approaches, a time when young families often try to find houses before summer and a new school year, many prospective homebuyers may find themselves scrolling a lot further down on Zillow to find a house they can actually afford.
