The gap between home prices and the ability to afford a house with financing got wider than it has been in 13 years, according to the First American Real House Price Index report for October.
The index, which measures relative housing values based on wages and mortgage rates, found that “real” prices were up 19.6% over the past 12 months, compared to a 3.6% rise in income nationally. Real home prices were up 3.7% during October. The average mortgage rate for October was 3.1%, up from 2.9% in September and 2.8% a year earlier. A year ago, the RHPI value also was rising but not nearly as fast. At that time, it was up just 1.7% from 12 months prior.
“Affordability sank to its lowest level since 2008 in October,” Mark Fleming, chief economist at First American, said in a press release.
If, despite the recent
“The challenge for homebuyers in 2022 will mirror 2020 and 2021 — you can’t buy what’s not for sale, even if you can afford to,” Fleming said.
Some markets could face more strains on affordability than others.
The RHPI rose more than 30% year-over-year in October in cities like Phoenix (33.7%), Charlotte (32.3%) and Tampa (30.9%). In keeping with these numbers, the states with the largest 12-month adjusted price gains were Arizona (32.7%), Florida (25.9%), and South Carolina (25.9%).
A combination of strong investor activity, in-migration to the area and limited inventory drove the extraordinary increase in Phoenix, according to First American. In Charlotte, a modest decline in average income pressured affordability. Tampa’s nominal home price gains were higher than Charlotte’s, but with wage growth in the latter city factored in, its relatively 12-month growth as measured on the RHPI was slightly lower.
“Ultimately, nominal house price appreciation overwhelmed any affordability lift from house-buying power in all three of these markets,” Fleming said.
