The US housing market has become so unaffordable that to make it affordable, like in pre-pandemic times, it would require three extreme scenarios. According to industry experts, the first scenario is people’s income as it needs to spike by 55% to make housing more affordable.
The other two scenarios, according to industry experts, are home prices and mortgage rates. Home prices must crash by 35%, and mortgage rates must drop by four percentage points. According to Andy Walden, vice president of enterprise research at ICE, one of these three scenarios must play out if houses were to return to pre-pandemic affordability.
Walden also told CNBC,
“If you look at home affordability itself, and what it would take to normalize the market today, it’s a 35% correction in price, or a 4% decline in rates, or a 55% growth in income. Some combination of those. Those are massive movements we’re talking about, and none of them are going to happen in a vacuum, and none of those one single factors are going to make the move.”
According to Walden, there is also a big potential for a movement to take place. However, there is a lack of inventory, due to which the prices are high. In its place, the inventory must actually be pulling back amid rising rates. The latest data on housing in August, according to Walden, was too high, and the buying power of people remains low at 6%.
The demand for housing has hit its lowest point in the last three weeks since the pandemic. It led to the constraining of the market and affordability. The demand reached its lowest level in the last forty years.
Continue Reading:
