6/9/2023 – MetroIntelligence Economic Update by P. DUFFY

MetroIntelligence Economic Update by P. DUFFY

Housing affordability posts solid gain but is still much lower than a year ago

According to the NAHB/Wells Fargo Housing Opportunity Index (HOI), 45.6% of new and existing homes sold between the beginning of January and end of March were affordable to families earning the U.S. median income of $96,300.  Although higher than in the final quarter of 2022 (38.1%), the latest HOI is still significantly lower than it was a year earlier (56.9%) – a reminder of ongoing housing affordability challenges.


Purchase loan applications fall 2 percent from the previous week and 27 percent year-on-year

The Market Composite Index for mortgage applications decreased 1.4 percent on a seasonally adjusted basis from one week earlier, with purchase loans falling 2 percent (and down 27 percent year-on-year) and refinance activity falling 1 percent (and down 42 percent year-on-year). The 30-year fixed rate dipped to 6.81 percent, 10 basis points lower than last week but still the second-highest rate of 2023.  The adjustable-rate mortgage (ARM) share of activity remained unchanged at 6.8 percent of total applications. The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.81 percent from 6.91 percent.


Starter homes long past affordability, even in secondary markets

In 41 of the 100 largest secondary cities in the U.S., renters earn half or less than half of the income they would need to buy a median-priced starter home. Regardless of what a starter home means nowadays, the fact remains that the once-ubiquitous entry-level home is now almost extinct — just like the dream of comfortably owning one. And, as secondary markets try on the pricey shoes of the primary ones, there’s no telling where the domino effect will eventually halt and when the demise of the starter home concept will be complete.