In recent weeks, we were in several meetings where analysts made the bullish argument that affordability had improved to the point where home prices could fall no further. While affordability has indeed returned to normal levels (as shown by the 5.2 reading on our Housing Cycle Barometer below (click here for an explanation of the barometer), we beg to differ. First of all, affordability swings dramatically with interest rate fluctuations, as evidenced by the drop last year that occurred when home prices fell $32,000 while rates fell 0.7 percent. Rates have risen since then and prices reported by the National Association of Realtors have risen (clearly some statistical anomaly as we are purchasing closing data for almost 200 counties and the trend is very different). The bottom li...
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