Housing affordability dropped to the lowest level in seven years at the end of 2016. It now takes 22.2 percent of a person’s median income to make the monthly principal and interest payment on a median-priced home, according to new findings from Black Knight Financial Services. That amounts to a 10 percent increase in the fourth quarter alone.
Economists blame rising mortgage rates, price increases, and sluggish income growth for the growing housing affordability problem.
Home prices increased gradually throughout last year. In December 2016, home prices were 7.2 percent higher compared to a year ago, according to CoreLogic. Some markets, such as California, Colorado, and Texas, prices are reaching new record highs as well.
Still, "nationally, homes remain more affordable than pre-bubble 'norms,' but it's clear that the market is now experiencing the most pressure — from an affordability perspective — since the housing recovery began," says Ben Graboske, executive vice president of Black Knight Data & Analytics.
Source: “Houses Are the Least Affordable They’ve Been in Seven Years: Here’s Why,” CNBC (Feb. 7, 2017)