Nearly all of the major markets in the US are now less affordable than their long-term benchmarks.

Despite the slowing of home-price growth in March, affordability slipped closer to an all-time low due to interest rates climbing above 5%, according to the latest Mortgage Monitor Report from Black Knight. “After accelerating for the last four months, the rate of annual home price growth actually slowed a bit in March,” said Ben Graboske, Black Knight data & analytics president. “Still, at 19.9% – down from an upwardly revised 20.1% in February – March would have otherwise set yet another record for appreciation. Year-to-date, home prices are already up nearly 6% nationwide with nearly 25% of the nation’s largest markets seeing gains of more than 7% over the last three months alone. Ninety-five percent of the 100 largest markets in the country are now less affordable than their long-term benchmarks, per Black Knight’s data. That’s up from just 6% when the pandemic began. Thirty-seven markets are less affordable than they’ve ever been. “As measured by the share of median income required to make the [principal and interest] payment on the average-priced home bought with 20% down, U.S. housing was the least affordable ever back in July 2006, when it took 34.1% to make that P&I payment,” explained Graboske. “At the end of February 2022, we were already at 29.1% – and both rates and prices have continued to climb since then. “As of April 21, that payment-to-income ratio has now climbed all the way to 32.5%, within just 1.6 percentage points of the prior record. … That equates to a $522 higher average monthly P&I payment —a 38% increase since January.” Getting to record-low affordability territory wouldn’t take much from here, according to Black Knight’s calculations. An increase of 50 basis points in 30-year mortgage rates or a 5% rise in home prices would push affordability past 2006 to its worst level on record.

Source: Scotsman Guide