OpinionIndustry News

Real estate’s July report card

Future-Proof: Navigate Threats, Seize Opportunities at ICNY 2018 | Jan 22-26 at the Marriott Marquis, Times Square, New York

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 line is that rate changes impact affordability significantly, and changes in underwriting criteria are not considered. Secondly, stable home prices occur when demand and supply are in balance and hom...