On June 2021 I wrote a post here titled “3 Reasons Why The Real Estate Boom Is Not A Bubble.” At the time, a lingering deficit of housing units was pushing up housing prices but the combination of low rates, healthy savings and strong income made it still quite affordable to buy a home. The Federal Reserve Bank of Atlanta agrees: According to a recent article, affordability was pretty high when the article came out. But oh my, how times have changed.
The affordability index fell precipitously from those good times to the lowest value since before the Financial Crisis. According to the Atlanta Fed, the decline was (and still is) driven mainly by higher prices and much more expensive mortgages. These factors also affect homeowners who bought or refinanced their homes over the past few years at historically low rates: They are stuck, because moving to a new home will require in many cases much higher mortgage payments. This, in turn, contributes to the shortage of existing homes offered for sale.
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