Housing affordability: Will it get better or worse this summer?
Low interest rates may not be enough to keep prices within reach for Americans during the pandemic
While many buyers may have been hoping to make a home purchase this year, the pandemic likely put that goal on pause for many Americans due to its influence on affordability.
First American chief economist Mark Fleming noted that there are generally three factors that determine housing affordability: mortgage rates, unadjusted house prices and household income.
Looking ahead, many experts expect mortgage rates to remain low -- particularly over the near-term.
HOME AFFORDABILITY INCREASING IN SOME AREAS AS BUYERS WADE BACK INTO MARKET
However, First American data shows early signs of home price appreciation due to pent-up demand in the market. And prices have not declined significantly during past recessions, either.
“We anticipate nominal house price appreciation to accelerate this summer,” Fleming said. “If household income growth slows and house prices continue to rise, even today’s record-low mortgage rates may not keep affordability from declining.”
Sufficient income may be a challenge for the more than 47 million Americans have filed new unemployment claims since mid-March. Many people have been furloughed, laid off or had their hours reduced as businesses struggle to weather the financial effects of social distancing and lockdown guidelines.
SUBURBS IN SOUTHERN STATES SURGE IN POPULARITY AMID PANDEMIC
A previous study noted that homes might be considered affordable in more markets this year when compared with last, but the average wage needed to buy a median-priced home is more than $75,000 in one-third of markets.
Home price appreciation was also outpacing wage growth in 66 percent of counties analyzed.
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Not all homebuyers have been affected equally by the pandemic. Coronavirus-related financial fallout has highlighted a growing wealth gap among homebuyers.
White-collar workers in high-security jobs, like technology, where duties are able to be performed remotely have continued their home searches. Others, who have been struggling more throughout the pandemic, have been priced out of the market.