Affordability Called Housing’s ‘Boogeyman’
August 27, 2018
Americans are spending the most money in nearly a decade on mortgage payments as a share of their household income, according to data from Morgan Stanley. “If there’s a boogeyman in the housing market today, it’s affordability,” James Egan, Morgan Stanley’s co-head of U.S. housing strategy, wrote in a note last week. “As home prices and mortgage rates have risen, it logically follows that homes have become less affordable.”
Egan says he isn’t hopeful that the rapid growth in home prices will ease any time soon, although he does see the increases gradually tapering eventually. But that hasn't happened so far: A CoreLogic housing index showed that home prices increased at the fastest annual rate in four years. The National Association of REALTORS® reported earlier this month that existing-home prices in the second quarter reached a new all-time high of $269,000 nationwide. “We believe that the current supply and demand environment will continue to push home prices higher, just at a decelerating pace,” Egan says.
Still, economists are quick to discount concerns of another housing bubble, noting that lending standards are much tighter than they were during the run-up to the last housing crash. The share of homeowners who were more than 60 days late on mortgage payments dropped to 1.7 percent in the second quarter, which is the lowest since the most recent housing crisis, according to data from TransUnion.
“A ‘Boogeyman in the Housing Market’ Is Making it Tougher for Americans to Own Homes, Morgan Stanley Says,” Business Insider (Aug. 24, 2018)
Updated: August 11, 2020