The median buyer is already short
In a speech on 23 September, Barr said the Atlanta Fed Home Ownership Affordability Monitor stood at 68 in July, the lowest in 21 years. A reading below 100 means a median-income family cannot afford a median-priced home at the current mortgage rate. Between 2000 and 2024, real median household income rose roughly 17 percent while real US house prices rose about 70 percent.[1]
About half of renters pay 30 percent or more of income on rent, and about one-fourth pay at least half their income. In August the consumer price index for rent of primary residence was 34 percent higher than in December 2019. Shelter prices are still rising at about 2.75 percent a year, and Barr said the higher rent level still weighs more heavily on lower-income renters.[1]
The cheap loan stays with the owner
Estimates Barr cited put the US housing shortfall at roughly 2 million to 5.5 million units, against a stock of roughly 150 million, or about 1 percent to 4 percent of that stock. About half of outstanding mortgages still carry a rate of 4 percent or lower, and nearly 80 percent sit below 6 percent. Barr said that lock-in can raise prices when fewer listings outweigh the drop in demand, and that his base case still requires further policy adjustments after last week's increase.[1]
For the week ending 18 September, the Mortgage Bankers Association put the average 30-year conforming rate at 7.12 percent, up from 6.97 percent, and reported that total applications fell 1.5 percent. The adjustable-rate share reached 9.8 percent. Mike Fratantoni said the 5/1 adjustable rate, at 6.10 percent, sat more than 1 percentage point below fixed rates. The household still carrying the 4 percent loan stays put, while the new application moves to the adjustable rate.[1], [2]