What do you know about Affordability at worst point

Home prices increased once again in November by 6.8% as housing inventory dropped 8%, making affordability that much worse, according to the existing home sales report from the National Association of Realtors.

The report analyzed median home prices derived from publicly recorded sales deed data collected by ATTOM and average wage data from the U.S. Bureau of Labor Statistics in 447 U.S. counties with a combined population of more than 184 million. The affordability index is based on the percentage of average wages needed to make monthly house payments on a median-priced home with a 30-year fixed rate and a 3% down payment — including property taxes and insurance.

An index of 100 indicates market affordability on par with historical norms while above 100 indicates more affordable than historic norms and below 100 indicates less affordable than historic norms.

Affordability decreased in the fourth quarter, but remained above the 100 mark at 103, down from 108 last quarter and 116 last year.

“Rapid home-price appreciation and tepid wage growth have combined to erode home affordability during this housing recovery, and the recent uptick in mortgage rates only accelerated that trend in the fourth quarter,” ATTOM Senior Vice President Daren Blomquist said.

“The prospect of further interest rate hikes in 2017 will likely cause further deterioration of home affordability next year,” Blomquist said. “Absent a strong resurgence in wage growth, that will put downward pressure on home price appreciation in many local markets.”