Two Year Streak of Increasing Housing Affordability Comes to an Ends in March 2021

According to the latest affordability report from First American Financial Corporation and its Chief Economist Mark Fleming, housing affordability on an annual basis declined in March for the first time since January 2019, signaling the end of a more than two-year streak of rising affordability. “The long run of increasing affordability snapped, even as two of the three key drivers of the Real House Price Index (RHPI), household income and mortgage rates, swung in favor of greater affordability relative to one year ago. Lower mortgage rates and higher household income compared with one year ago propelled an 11% increase in house-buying power. However, surging house-buying power drives demand, and rising demand in a supply-constrained market accelerates nominal house price appreciation,” said Fleming. “In March, the final component of the RHPI, nominal house prices, appreciated at its fastest annual pace since 2005, 14.8%, wiping out any affordability boost from rising house-buying power. Yet, real estate is local and since house-buying power and nominal house price gains vary by city, local affordability trends may differ greatly city by city as well.”