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October 25, 2018 | Housing Affordability Falls to a 10 Year Low

Robert Campbell

Robert Campbell is a real estate analyst and economist. He's been publishing The Campbell Real Estate Timing Letter since 2002. His book (Timing the Real Estate Market) presents a clearly defined method for predicting the peaks and valleys of real estate cycles.

Rising mortgage rates and rising housing prices have pushed home affordability to the lowest levels we’ve seen in 10 years – both nationally and in California.

For California, the California Association of Realtors (CAR) reported that housing affordability fell to 26% in Q2 2018 – a level also not seen since 2008.

In response to housing affordability falling to 10 year lows, year-over-year growth in housing prices has started falling as well.

ATTOM Data Solutions reported that U.S. single family homes and condos sold for a median price of $256,000 in Q3 2018.  While up 4.8 percent from a year ago, this was the slowest pace of U.S. home price appreciation since Q2 2016.

Which Housing Markets are Cooling – 

Which are Heating Up

While home price growth is cooling in 49% of all local markets, it is accelerating in the remaining 51% – which is illustrated in the chart below.

Housing markets with accelerating year-over-year home price appreciation include San Jose, San Francisco, Las Vegas, and Atlanta – all of which posted double-digit percentage gains in median home prices compared to a year ago according to ATTOM.

Housing markets with cooling year-over-year rates of home price appreciation include Los Angeles, Chicago, Dallas-Fort Worth, and Miami.

Medium Home Prices are Still Below 

2005 Peak Levels in 31% of all Markets

While median home prices nationwide in Q3 2018 were 11% above their peak levels of $230,000 in Q3 2005 – 31% of all U.S housing markets are still below those peak levels.

Housing prices have increased 76% since bottoming out in Q1 2012 – while household incomes have increased by 17% since then.

Final Words 

Will 5% mortgage rates trigger the next downturn in housing prices?

It’s hard to tell because there could be another catalyst that isn’t even on our radar screens yet.  Whatever the catalyst may be, downside risk continues to grow.


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