What effect did the bottom falling out of the bottom of the new home market in July 2022 have on their relative affordability to the typical American household?
If you answered "new homes became less affordable", you're right! The mortgage payment for a new home sold to a median income earning household would consume 37.7% of their monthly income, just a touch below its recent peak.
In terms of raw affordability, the percentage of median household income with respect to the median new home sale price in July 2022 was 17.5%, holding near its record low value.
Meanwhile, in a sign that at least one major news organization isn't paying attention, NBC News says "this is the best time in years to buy a house". Really.
That's just embarassing. If you know anyone who works at NBC News, please send them links to the charts on this page, or send them to Calculated Risk, or send them to the Wall Street Journal. There's no lack of credible sources who will dispute their assertion.
To understand why, please consider that price cuts are only just starting as housing sales collapse as the Federal Reserve continues its plans to hike rates to fight President Biden's inflation. As time passes, that means there will be many more times in the months ahead that will be a better time to buy a home than at this moment, just shortly past a peak of unaffordability, as NBC News would seem to believe. Buyers willing to wait for a better time to buy to get a better deal on a home than they can today will be rewarded.
References
U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 23 August 2022.
U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 23 August 2022.
Freddie Mac. 30-Year Fixed Rate Mortgages Since 1971. [Online Database]. Accessed 27 August 2022.
Labels: personal finance, real estate
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