It seems U.S. prices in 2022 can’t avoid comparisons to the 1980s. Overall inflation is running at its highest level since 1981, and the cost of buying a home has reached its highest point since 1989, according to a new report from the National Association of Realtors.
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NAR’s housing-affordability index, released last week, fell to 98.5 in June 2022 — its lowest level since June 1989, when the index was 98.3. The index weighs several different factors, including family incomes, mortgage rates and sales prices, to come up with home affordability, The Wall Street Journal reported.
The reason homes have become so expensive in recent months is that prices have continued to skyrocket at the same time that mortgage rates are pushing higher. A separate report from NAR, also released last week, found that the median price of a single-family existing home hit $413,500 during the second quarter, up 14.2% from the previous year. That marked the first time ever that the price eclipsed $400,000.
Eighty percent of U.S. metro markets — 148 out of 185 — saw double-digit price increases during Q2. That was up from 70% the previous quarter. Housing affordability “significantly declined” as the monthly mortgage payment on a typical existing single-family home with a 20% down payment surged by nearly one-third from the previous quarter and by half from the previous year.
“Home prices have increased at a pace that far exceeds wage gains, especially for low- and middle-income workers,” NAR Chief Economist Lawrence Yun said in a press release.
But there could be good news on the horizon for home buyers. Existing-home sales have now declined for five straight months, meaning buyers have less competition for available inventory. Meanwhile, in early August the 30-year fixed-rate mortgage fell to an average of 4.99% from a June peak of 5.81%, NBC News reported, citing data from Freddie Mac.
The 30-year fixed rate did rise back up to 5.22% last week, Forbes reported, but was still down 59 basis points from June’s peak. Rates could fall to as low as 4.5% by the end of 2022, Bank of America said in a recent note.
“Overall, the national price deceleration inevitably followed the softening sales, providing well-positioned prospective buyers a small measure of welcomed relief,” Yun said. “The recent dips in mortgage rates will bring additional buyers to market, especially in those places where home prices are still relatively affordable and where jobs are being added.”
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