With stock prices cratering and bond yields soaring, it’s a fair question to ask if the housing bubble is about to burst, too. After all, home prices have skyrocketed in recent years thanks to artificially low-interest rates engineered by the Federal Reserve, which has kept mortgage rates well below historic levels ever since the 2008 global financial crisis, even well under 4% for most of the past three years. But with the average rate on a 30-year fixed-rate mortgage now at more than 5% and climbing, is the home price boom still sustainable?
According to the National Association of Realtors, the median price of a single-family home has jumped by over $100,000, or more than 39%, to $382,000 in March from $274,000 in 2019. The median principal and interest payment has increased by nearly 50%, to $1,502 from $1,054 three years ago, while the percentage of monthly income the typical mortgage payment eats up has risen to more than 20% from less than 16% in 2019. Likewise, the group’s affordability index, which measures whether a typical family earns enough to qualify for a mortgage, has dropped to 124.0 from nearly 160. While the NAR says the median family income has increased more than 10% to $89,321 from $80,808 during that time, the amount of income needed to qualify for a mortgage to buy a median-priced home has jumped by more than 40%, to more than $72,000.
Now, these NAR figures are as of March, when the average rate on a 30-year mortgage was 4.24%. Since then, that figure has risen by more than 100 basis points, to more than 5.25%.
So, is this a bubble ripe for the popping? Continue reading "Is The Housing Bubble The Next To Burst?"