News for hackers. Stuff that matters.

A comment on U.S. house prices are rising exponentially faster than income.

Re:U.S. house prices are rising exponentially faster than in... by dzab on Saturday October 30, 2021 @10:10AM (#29048895)
Yes, prices are elevated, but nowhere near the point any median price to median income analysis suggests.

The flaw in the price to income ratio is the cost of borrowing (interest rates). Most home buyers consider what they can “afford” by comparing their monthly income against their monthly mortgage payment.

For this reason, a more accurate way to consider the cost of home ownership is through various affordability indices which take interest rates and other borrowing conditions into account. Calculated Risk [1] and First American [2] do an excellent job of this.

A rise in interest rates will likely stifle current home price appreciate unless wage growth offsets this increase at the same time.

[1] https://calculatedrisk.substack.com/p/real-house-prices-pric...

[2] https://www.firstam.com/economics/real-house-price-index/

[ Parent | on HN ]
Re:U.S. house prices are rising exponentially faster than in... by rossdavidh on Saturday October 30, 2021 @10:17AM (#29048960)
Well, if any significant percentage of the existing mortgages are adjustable-rate mortgages, then as soon as rates begin to rise, a lot of them will go from affordable to unaffordable, all at the same time. Which ought to sound familiar...
[ Parent | on HN ]