Removing the fictional "owner equivalent rent" (OER) from price indexes reveals that inflation has decreased more than reported, with the year-over-year inflation rate falling from 3.2% to 1.5% and the personal-consumption expenditures price index declining from 3% to 2.2%.
The surge in mortgage rates has caused housing affordability to reach the lowest level since 2000, leading to a slow fall in the housing market and a potential dip in home prices, although the current market differs from the conditions that preceded the 2008 crash, with low housing inventory and a lack of risky mortgage products, making mortgage rates the key lever to improve affordability.
Mortgage rates have reached a 22-year high and are expected to continue rising, which will further challenge affordability and slow home sales. Additionally, the high rates are increasing the number of all-cash buyers in the housing market. On the other hand, rents have decreased for a third consecutive month, providing some relief for renters.
Home prices in the US have continued to rise for the fifth consecutive month, reaching near all-time highs, although high mortgage rates could impact further price gains for the rest of the year. Cities in the Midwest and New England saw the most notable price acceleration, while cities in the West experienced year-over-year price drops. Low inventory remains a challenge, with few homeowners wanting to sell, leading to higher prices and increased competition for available homes. In contrast, the rental market is offering more affordability as rental inventory increases.
The overall median asking rent for a one-bedroom apartment in Boston jumped 5.36% from July to August, making it the third-most expensive rental market in the country, according to a report by ApartmentAdvisor.
Apartment rents in the U.S. are cooling off and are expected to turn negative compared to last year due to high supply of new units and increased options for renters, while high mortgage rates, home prices, and tight supply keep more people in the rental market.
The housing market is facing challenges due to a lack of inventory, high mortgage rates, and buyer hesitancy, leading to a decrease in sales and mortgage applications, while prices remain high and inventory levels decline.
Housing affordability is expected to worsen due to the delayed impact of higher mortgage rates, with home prices predicted to rise 0.7% year over year and reach a new record high, according to Morgan Stanley.
Rent prices in the Bay Area, including San Francisco and Oakland, are declining for the seventh straight month, with a year-over-year drop of 4.3%, providing some relief for renters; however, low-income tenants still face significant affordability challenges.
Landlords are offering incentives to attract renters in the US housing market, even though the median asking rent is at a near-record high, with some landlords providing one-time discounts or a few months free to renters, which effectively lowers rents in certain areas, although this may not be reflected in asking-rent data. The rental vacancy rate has increased, leading to more vacancies for landlords to fill, and landlords are raising rents for existing tenants but not new tenants, in order to maintain high asking rents while strengthening returns. Demand for higher-end properties is declining, while more affordable units are in demand. The rental market varies across regions, with the West and South experiencing decreases in median asking rent, while the Midwest and Northeast have seen increases.
Buyers in the housing market are resilient as they face low inventory and high prices, with nearly half of homes selling above list price and many making multiple offers to secure their dream homes, according to a survey by Bright MLS.
The United States housing market has seen a 21 percent decline in previously occupied home sales over the past year, continuing the slowdown caused by rising interest rates, while prices continue to rise despite the decrease in sales, leading to a shortage of affordable homes and worsening home affordability for the foreseeable future.
The Yorkshire buy-to-let market is experiencing an exodus of landlords due to higher borrowing costs and various pressures, resulting in a shrinking rental market and increased rents, causing difficulties for tenants and forcing younger people to live with their parents.
The Federal Reserve's indication that interest rates will remain high for longer is expected to further increase housing affordability challenges, pushing potential first-time homebuyers towards renting as buying becomes less affordable, according to economists at Realtor.com.
Renters in big cities, such as New York, London, and Sydney, are facing increasing housing costs as a result of high inflation, rising interest rates, and a lack of affordable accommodation.
The rise in housing prices over the past three years can be attributed to a shortage of supply, low volume in the market, and the introduction of mortgage rate buydowns; however, there is now a risk of too much inventory being introduced into the market, and a potential decline in mortgage rates could lead to a large amount of existing homes being sold and a subsequent oversupply.
Home prices have decreased in several major cities, but many remain overvalued and at risk of entering a housing bubble, according to a UBS report, with Zurich and Tokyo being identified as the most overvalued markets. UBS defines a bubble as a sustained mispricing of an asset, and factors such as price-to-income and price-to-rent ratios were used to determine the rankings. While some cities have seen a drop in prices, a housing shortage could lead to a renewed boom if interest rates fall.
The US housing market is showing signs of hope for homebuyers as inventory increases and more sellers are lowering their asking prices, but high mortgage rates and rising prices are still impacting affordability.
A shortage of luxury apartments in Manhattan is driving up prices at the top of the market, with the supply of luxury apartments dropping 24% and prices remaining strong, as high-end buyers are less affected by rising mortgage rates and take advantage of attractive prices during a lack of new development sales.
Despite lower temperatures and high interest rates slowing down home sales in the fall, certain affordable markets, such as Rochester, NY, are experiencing high demand and competitive conditions due to their affordability and lower cost of living.
The U.S. housing market is extremely unaffordable, with mortgage rates reaching a multi-decade high at 7.49% and incomes needing to increase by 55% for affordability; however, experts suggest that home prices and mortgage rates are unlikely to decrease soon due to low inventory and high demand.
The housing market is currently experiencing high mortgage rates and rising home prices, making affordability worse than in 2008, according to Goldman Sachs analysis. Despite stronger consumer fundamentals, housing affordability has deteriorated beyond 2006 levels, and without an increase in home supply, unemployment, or a drop in mortgage rates, home prices are expected to continue climbing.
