Housing affordability in the U.S. worsened by 5 percent during the first quarter of 2017, according to a report by Arch Mortgage Insurance Co.
The report predicted the monthly mortgage payments needed for home purchases could go up another 10–15 percent by the end of the year, making 2018 one of the worst full-year deteriorations in affordability in the past 25 years.
“If mortgage rates and home prices continue to rise as expected, affordability will get hammered by year-end as demand continues to outstrip supply,” said Ralph G. DeFranco, Arch Capital Services Inc’s global chief economist-mortgage services. “A strong U.S. economy combined with a housing shortage in many markets means that there is little hope of any price drop for buyers. Whether someone is looking to upgrade or purchase their first home, the window to buy before rates jump again is probably closing fast.”
The report identified Tacoma, Wash., Fresno, Calif., Baltimore and Boston as the cities where affordability is expected to decline the fastest. Alaska, North Dakota, Wyoming and West Virginia have the highest probability of home price declines over the next two years, the report found.