Westchester residents attended an affordable housing expo in White Plains.

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Housing Affordability At Lowest Level In Nearly A Decade

June 25, 2018 - 4:39 pm

NEW YORK (WCBS 880) -- Unemployment is down and wages are up, but housing affordability has dropped to its lowest level in nearly a decade.

CBS News Business Analyst Jill Schlesinger explained to WCBS 880’s Wayne Cabot and Paul Murnane why it is happening.

“Prices have been rising since the housing market bottomed out. About 2012 is when we saw prices really bottom out, and since then, the market’s been plagued by a lack of inventory,” Schlesinger said. “There just aren’t that many homes for sale, because a lot of big institutional investors swept in, bought distressed properties, and held onto them to rent them out. So we have that factor – low levels of inventory contribute to rising home prices.”

Mortgage rates have also gone up, Schlesinger noted. They are nowhere near the far higher rates of many years past, and thus, a 4 1/2-percent, 30-year fixed rate mortgage is still “incredibly affordable,” she said.

But compared with the 3 1/2- or 3 3/4-percent mortgages just a year ago, the rates have really increased.

“These two factors have put home affordability at the worst levels in nearly a decade,” she said.

Schlesinger was quick to note that the current situation is not the same as the housing bubble that led to the Great Recession 10 years ago. More vigilant lending has meant that the “weird subprime mortgages” that brought on that situation are rare now.

Still, Schlesinger said, would-be home buyers are finding themselves in difficult situations. Many New York metropolitan area residents are burdened by high rents and would like to buy a home, where their principal and interest will be fixed for 30 years unlike ever-rising rents.

But high housing prices have prevented that from happening, Schlesinger said. She explained one specific example to Cabot and Murnane.

“Friends of mine – young couple in their 30s; they had a 2-year-old. They sold a co-op they bought in Hoboken. They made a boatload of money. They thought, ‘Great, we’ll go buy a house.’ Couldn’t find a house,” she said. “You ready for this, guys? They had to move in with the parents, with a 2-year-old. So, you know, if you have a very close relationship with your parents or your in-laws, a very good way to test that is to move in with a 2-year-old.”