JACKSONVILLE, Fla.–Increasing property values combined with rising mortgage rates are helping to make homes more unaffordable for many Americans.
According to data compiled by Black Knight Financial Services, housing affordability is at its weakest point since the recovery from the Great Recession began. Noting that the average rate on the 30-year fixed mortgage has risen to 4.25% from around 3.5% since the national elections, the average cost of a home increased by more than $16,400 "almost overnight," according to Black Knight Financial Services. The company said it now takes 21.6% of the median income to buy the median priced home, the highest share since June 2010.
"The last time affordability ratios came close to this point (back in 2013 after a sharp rise in rates), there was an immediate reaction in terms of home price appreciation," said Ben Graboske, vice president of Black Knight Data & Analytics, in a statement. "They didn't fall, but the rate at which they had been rising was basically cut in half, from 9% annually to less than 5% in a matter of months."
What is different in today’s market, according to Black Knight Data, is the housing supply is low, which is keeping prices high.
Black Knight noted that housing affordability remains below the historical norm, which is when the cost of total monthly payments is about 24% of income, but that percentage is likely to rise more quickly in the next year, as prices are already now higher than they were during the peak of the last housing boom in 2006.
Separately, Black Knight’s analysis also found that a large number of current homeowners who either couldn’t or didn't take advantage of the low interest rates of the last few years are now out of the running for those monthly savings. About 4.3 million borrowers can no longer benefit from a refinance, bringing the total refinanceable population to a two-year low, Black Knight said. It added that its analysis found borrowers still have about $1 billion per month in potential savings on the table, but that's down from $2.1 billion before the election.