Recent Housing Stats - Housing Affordability Remains an Issue & Home Values to Remain High

[mortgagehorn]

Recent report just came out and wanted to share.

Please don't make this thread political - to be honest affordable housing is something we have to resolve together as a nation.

It's being posted as informational for those that may be looking to buy or sell in the foreseeable future.


Key Points and Stats

1. Only 37.7% of homes sold, new & existing, were affordable for median-income families earning $96,300 annually in 4Q2023 - second lowest reading only to 3Q2023 and since NAHB began tracking affordability on a consistent basis in 2012.

1. The top five least affordable housing markets are all located in California where families earning the median area income can expect median priced homes to exceed 5x their income and suck up 40% of their monthly income in principal and interest payments alone.

1. The most affordable housing markets continue to be in the Midwest and stretch into parts of the Northeast where families can spend less than 20% of their income on P&I payments and stay within the generally accepted affordable range for home prices being 2.5-3x household income.

1. Recent research suggests that demographic demand will continue to support upward momentum in home prices for the next 5 to 10 years with no structural demographic and supply induced downward pressure on home prices until 20 years out.

1. FHA loans have gone from 17.6% of the agency mortgage market in May 2022 to 25.2% as of November 2023, representing the highest share since May 2017. The rise in FHA loans is a direct reflection of the determination of first-time homebuyers to achieve homeownership at all costs, in addition to them and repeat homebuyers needing to reach for more flexible guidelines that allow for higher debt-to-income ratios to keep up with rising mortgage rates and home prices.

1. Even repeat homebuyers, despite equity from the sale of a home are burdening themselves with restricted cash flow as the share of borrowers with greater than 43% DTI has rocketed from 28.6% in August 2020 to 47.2% in November 2023.

1. Although historically credit scores have always been the most important variable in determining credit worthiness and the ability to repay leading to future loan performance, we appear to be entering into uncharted territory when it comes to debt-to-income ratios. Recent homebuyers in every region throughout the country are saddling up to high monthly mortgage debt. Can they truly handle it or is this the canary in the coal mine that warrants extra attention?

My own thoughts...

One bright point is if you are a homeowner values are expected to continue to rise over the next 5-10 years.

It will also be interesting to see if employers migrate to more affordable parts of the country like the Mid-West to help their employees relocate to an area where they can better afford a home.

The higher DTIs or Debt to Income Ratios are troubling as that leads to less money for people to save/invest/ pay for their children's college and any other items like vacations or non-discretionary spending. What will that do to the economy?

Have an Amazing Weekend!

MH

 

[BucketList]

With the exception of a brief window before 2008, I can’t think of time when home buying was ever a bad play. Just suck it up. Buy the house. Look up in a few years and be thankful you bought when you did.

 

[grilly]

Great info. What report in this from?

 

[PreamoHorn]

With the exception of a brief window before 2008, I can’t think of time when home buying was ever a bad play. Just suck it up. Buy the house. Look up in a few years and be thankful you bought when you did.

This.
You can find value and then worry about refinancing in 2-4 years as interest rates decline.

 

[Little Cigar]

@mortgagehorn Carey I appreciate you sounding the alarm. Unfortunately for whatever reason either people just don't see the current economic state, or are just happy with their day to day lives and not looking beyond to what is truly coming. It's pretty apparent we will have an economic collapse this year that none of us have ever experienced in our lifetime based on all the numbers. Of course most people will live their lives until it is totally disrupted. 1929 might be kind when discussing what we are walking into. It's not even a conspiracy theory anymore, when most financial experts keep telling the public this is unsustainable.

 

[Malibusmostwanted]

Are you saying affordable housing is limited to home ownership?

Haven’t rents come down in nearly every market? Avg 2 BR across the country rents for $1,300/mo. Two people each in the low income category sharing an apartment can afford that.

 

[Wellby]

Very great info. Thanks for posting OP!

 

[BattleshipTexas]

Are you saying affordable housing is limited to home ownership?

Haven’t rents come down in nearly every market? Avg 2 BR across the country rents for $1,300/mo. Two people each in the low income category sharing an apartment can afford that.

Home ownership was the goal in the 1950s, but in the modern economy where people move jobs 8 or 9 times in a career and often to new locations, isn't rental a better model for most younger people starting careers?

 

[ColladorUT]

I think a great first step to helping everyone is reducing or restricting corporate owned residential real estate. Can't see any negatives at all to this seemingly simple idea.

 

[mortgagehorn]

Great info. What report in this from?

It's a weekly internal report from the company where I work New American Funding - we can lend in all 50 states so we provide nationwide data.

We also service +/-98% of our loans - so your loan is not always getting sold. Our servicing center is right here in Austin off 620.

They have a top-notch analytics team. Some of the sources are as follows:

National Association of Home Builders
Wells Fargo
Freddie Mac
Indiana University Center for Real Estate Studies

You Can Access the Weekly Report He on LinkedIn - I shared the link below.

There is a lot more there with cool maps showing data across the country etc

https://www.linkedin.com/newsletters/naf-insights-7027427819378868225/

If you have any individual questions on the real-estate/mortgage market I'm happy to help - just send me a DM

 

[mortgagehorn]

Home ownership was the goal in the 1950s, but in the modern economy where people move jobs 8 or 9 times in a career and often to new locations, isn't rental a better model for most younger people starting careers?

You need to look at the market where you are located and see rent vs own affordability index, the historical appreciation rate etc.

Like most of life there is no one-sized fits all.

Though your interest rate on rent is always 100%

 

[grilly]

This.
You can find value and then worry about refinancing in 2-4 years as interest rates decline.

This true from an investment standpoint but during those 2-4 years millions of first time homeowners are going be extremely house poor. And then life happens.

It is never a good thing when millions of people sign up for their first real debt and then combine that with a bad debt to income ratio. There’s no pausing these loans, and btw, a lot of these folks buying these homes just had their student loan payments start back up.

 

[Santiam]

The other thing worth remembering, is the equity in a home is the primary way many in our country build wealth, especially the middle class and even for some that are upper middle class. Forcing people to rent rather than own a home limits the ways ordinary people can build wealth. Another point, in many parts of the country rent is very high too.

 

[HSB Horn 2023]

How do you like NAF? I gave them a good look. Liked a lot of what they had going on.

 

[BattleshipTexas]

@mortgagehorn Carey I appreciate you sounding the alarm. Unfortunately for whatever reason either people just don't see the current economic state, or are just happy with their day to day lives and not looking beyond to what is truly coming. It's pretty apparent we will have an economic collapse this year that none of us have ever experienced in our lifetime based on all the numbers. Of course most people will live their lives until it is totally disrupted. 1929 might be kind when discussing what we are walking into. It's not even a conspiracy theory anymore, when most financial experts keep telling the public this is unsustainable.

If that is true, hope it isn't, what could people realistically due to prepare for that kind of downturn? Hoard cash? Gold? Food?

 

[HerkieWalls]

I think we will have problems with affordability as long as corporations keep building neighborhoods and short term rentals stay relevant. So many people are buying homes with the sole purpose of running a VRBO property. It has changed the game it feels like.

 

[HerkieWalls]

This true from an investment standpoint but during those 2-4 years millions of first time homeowners are going be extremely house poor. And then life happens.

It is never a good thing when millions of people sign up for their first real debt and then combine that with a bad debt to income ratio. There’s no pausing these loans, and btw, a lot of these folks buying these homes just had their student loan payments ERASED

FIFY

 

[The Bostitch]

i don't remember the exact number but its somewhere between 60-70% of current mortgages are those historically low (3% or lower) interest rates. People who are paying 2.75% interest aren't excited about moving to a new home where they pay current interest rates, so they're staying put. That means fewer homes on the market, or less supply.

I'm no economist, but I know high demand and short supply is a recipe for high prices.

 

[Zorlac]

@mortgagehorn Carey I appreciate you sounding the alarm. Unfortunately for whatever reason either people just don't see the current economic state, or are just happy with their day to day lives and not looking beyond to what is truly coming. It's pretty apparent we will have an economic collapse this year that none of us have ever experienced in our lifetime based on all the numbers. Of course most people will live their lives until it is totally disrupted. 1929 might be kind when discussing what we are walking into. It's not even a conspiracy theory anymore, when most financial experts keep telling the public this is unsustainable.

@ColladorUT

Why do you think this is funny?

 

[Little Cigar]

If that is true, hope it isn't, what could people realistically due to prepare for that kind of downturn? Hoard cash? Gold? Food?

Most that I have seen say to have a little extra food, water and have some money put aside outside of a bank. You can't go wrong with Gold and Silver. I'm no doomsday prepper by any means, but in our current state, it's probably smart to plan accordingly.

 

[mortgagehorn]

How do you like NAF? I gave them a good look. Liked a lot of what they had going on.

Even though for the first 14 years I owned my own small correspondent lending company, if I had to do it over again I would have started and ended my career here.

Happy to be part of their team. Every company throws around the word "Culture", this place has it and it's awesome. Been at a few national companies nothing like they have.

Send me with a DM and I can go into further detail - don't want to clutter up the thread.

 

[BattleshipTexas]

Most that I have seen say to have a little extra food, water and have some money put aside outside of a bank. You can't go wrong with Gold and Silver. I'm no doomsday prepper by any means, but in our current state, it's probably smart to plan accordingly.

That doesn't sound like that would be enough for a 1929 style collapse.

 

[PreamoHorn]

@ColladorUT

Why do you think this is funny?

From my point of view ……. The “collapse’ been coming since about 1973 …….
Never Happens. That’s funny.

 

[Zorlac]

From my point of view ……. The “collapse’ been coming since about 1973 …….
Never Happens. That’s funny.

It's funny because it hasn't happened again? Does that mean you don't thinks it's possible?

 

[Little Cigar]

That doesn't sound like that would be enough for a 1929 style collapse.

That just helps initially. That's basically all you can do, which is probably doing more than most.

 

[ppchj98]

Recent report just came out and wanted to share.

Please don't make this thread political - to be honest affordable housing is something we have to resolve together as a nation.

It's being posted as informational for those that may be looking to buy or sell in the foreseeable future.


Key Points and Stats

1. Only 37.7% of homes sold, new & existing, were affordable for median-income families earning $96,300 annually in 4Q2023 - second lowest reading only to 3Q2023 and since NAHB began tracking affordability on a consistent basis in 2012.
2. The top five least affordable housing markets are all located in California where families earning the median area income can expect median priced homes to exceed 5x their income and suck up 40% of their monthly income in principal and interest payments alone.
3. The most affordable housing markets continue to be in the Midwest and stretch into parts of the Northeast where families can spend less than 20% of their income on P&I payments and stay within the generally accepted affordable range for home prices being 2.5-3x household income.
4. Recent research suggests that demographic demand will continue to support upward momentum in home prices for the next 5 to 10 years with no structural demographic and supply induced downward pressure on home prices until 20 years out.
5. FHA loans have gone from 17.6% of the agency mortgage market in May 2022 to 25.2% as of November 2023, representing the highest share since May 2017. The rise in FHA loans is a direct reflection of the determination of first-time homebuyers to achieve homeownership at all costs, in addition to them and repeat homebuyers needing to reach for more flexible guidelines that allow for higher debt-to-income ratios to keep up with rising mortgage rates and home prices.
6. Even repeat homebuyers, despite equity from the sale of a home are burdening themselves with restricted cash flow as the share of borrowers with greater than 43% DTI has rocketed from 28.6% in August 2020 to 47.2% in November 2023.
7. Although historically credit scores have always been the most important variable in determining credit worthiness and the ability to repay leading to future loan performance, we appear to be entering into uncharted territory when it comes to debt-to-income ratios. Recent homebuyers in every region throughout the country are saddling up to high monthly mortgage debt. Can they truly handle it or is this the canary in the coal mine that warrants extra attention?

My own thoughts...

One bright point is if you are a homeowner values are expected to continue to rise over the next 5-10 years.

It will also be interesting to see if employers migrate to more affordable parts of the country like the Mid-West to help their employees relocate to an area where they can better afford a home.

The higher DTIs or Debt to Income Ratios are troubling as that leads to less money for people to save/invest/ pay for their children's college and any other items like vacations or non-discretionary spending. What will that do to the economy?

Have an Amazing Weekend!

MH

Thanks for this. this may have been addressed in the thread but on this point "h no structural demographic and supply induced downward pressure on home prices until 20 years out." ----

what are the structural demographic trends that could create downward pressure?

 

[ColladorUT]

@ColladorUT

Why do you think this is funny?

He kind of predicted that the great depression would be seen as nicer than what's about to happen.

There is a LOT of economic data that would suggest that's pretty funny. I've heard plenty of recession prediction, stock market crash predictions, etc.

I'm not saying we aren't going to have economic times of contraction, but every news outlet told me last year was going to be a recession and market crash. Saying the same this year. Will say the same next year. Eventually it'll be right, but its amusing to me.

 

[PreamoHorn]

It's funny because it hasn't happened again? Does that mean you don't thinks it's possible?

It’s definitely possible - but Extremely unlikely. We just made it through a freakin pandemic.
I’d say that’s a pretty strong indication that the world economy is much more resilient than we expected.

 

[MB-HORNS]

@mortgagehorn Carey I appreciate you sounding the alarm. Unfortunately for whatever reason either people just don't see the current economic state, or are just happy with their day to day lives and not looking beyond to what is truly coming. It's pretty apparent we will have an economic collapse this year that none of us have ever experienced in our lifetime based on all the numbers. Of course most people will live their lives until it is totally disrupted. 1929 might be kind when discussing what we are walking into. It's not even a conspiracy theory anymore, when most financial experts keep telling the public this is unsustainable.

As long as this does not interrupt my fall Texas football plans and tailgate I am good.

 

[MB-HORNS]

He kind of predicted that the great depression would be seen as nicer than what's about to happen.

There is a LOT of economic data that would suggest that's pretty funny. I've heard plenty of recession prediction, stock market crash predictions, etc.

I'm not saying we aren't going to have economic times of contraction, but every news outlet told me last year was going to be a recession and market crash. Saying the same this year. Will say the same next year. Eventually it'll be right, but its amusing to me.

It's what doomsayers do. They live for the drama of potential fall of society. Markets and economies go up and go down. The 2007-08 housing bubble was pretty rough but we all survived.