Boston High-Rise Condos for Sale and Rent
Boston luxury condos: Affordability Index
The last time housing affordability was this low, you would have to go back to the early days of the George Bush administration — the first one.
Housing affordability hit its lowest point since 1989 in June, the Wall Street Journal reported. That’s according to an index kept by the National Association of Realtors, which considers income, mortgage rates and sale prices of existing homes.
Record home prices are one of the factors that have pushed buyers, particularly first-time buyers, out of the market. According to NAR, existing home prices have soared 46 percent in the past three years, hitting a median of $423,300 in June.
Mortgage rates, which were historically low during the early months of the pandemic, also soared amid rate hikes from the Federal Reserve first implemented rate hikes. After ending last year at 3.1 percent, the average mortgage rate was 5.6 percent in June.
These two factors, along with inflation, low inventory and other economic headwinds, are leading to a slowdown in the housing market. Redfin reported Friday that homebuyer competition fell to its lowest levels since the beginning of the pandemic, likely because fewer people are in a position to buy.
The good news for Americans is that a July affordability report would probably not match the frenzy recorded in June, as mortgage rates are tempering. While they remain highly volatile, the mortgage rate was at 5.22 percent this week.
“Thankfully, the worst in affordability could already be over for this cycle,” NAR chief economist Lawrence Yun said. “Mortgage rates have calmed down in recent weeks, and the consistent wage growth … is narrowing the gap with home-price growth.”
Still, there’s a growing body of evidence that many buyers are experiencing some of the worst affordability problems of a generation. Zillow reported in May that housing affordability reached its lowest point since 2007, when the company started tracking the metric.
— Holden Walter-Warner
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If you are considering selling your current Boston condo, to either move up to a larger Boston luxury condo or into a home in an area that better suits your current family needs, great news was just revealed.
Last week, Trulia posted a blog, Not Your Father’s Housing Market, which examined home affordability over the last 40+ years (1975-2016). Their research revealed that:
“Nationally, homes are just about the most affordable they’ve been in the last 40 years… the median household could afford a home 1.5 times more expensive than the median home price. In 1980, the median household could only afford about 3/4 of the median home price.
Despite relatively stagnant incomes, affordability has grown due to the sharp drop in mortgage rates over the last 30 years – from a high of over 16% in the 1980s to under 4% by 2016.
Of the nation’s 100 largest metros, only Miami became unaffordable between 1990 and 2016. Meanwhile, 22 metros have flipped from being unaffordable to becoming affordable in that same time frame.”
Here is a graph showing the Affordability Index compared to the 40-year average:
Boston luxury condos
The graph shows that housing affordability is better now than at any other time in the last forty years, except during the housing crash last decade.
(Remember that during the crash you could purchase distressed properties – foreclosures and short sales – at 20-50% discounts.)
There is no doubt that with home prices and mortgage rates on the rise, the affordability index will continue to fall. That is why if you are thinking of moving up, you probably shouldn’t wait.
Conclusion
If you have held off on moving up to a Boston luxury dream home because you were hoping to time the market, that time has come. For more information please call me at 617-720-5454