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Navigating the Decline: Home Affordability in 2021

Home Affordability Decline

The housing market has undergone many changes lately, and the decline in home affordability is one such change. The National Association of Realtors (NAR) Housing Affordability Index has hit its lowest level since 1989, indicating that buying a home is becoming increasingly difficult for many Americans.

In this article, we will explore the primary factors contributing to the decline, the reasons for the increase in home prices, and its impact on low- and middle-income workers.

Factors Contributing to the Decline

The decline in home affordability can be attributed to multiple factors, including family incomes, mortgage rates, and sales prices. Family incomes have remained stagnant, while mortgage rates have increased, which means that individuals and families are required to pay a higher percentage of their income towards their mortgage.

Sales prices for homes have skyrocketed, primarily due to a lack of inventory and high demand.

Reasons for the Increase in Home Prices

The increase in home prices is due to a combination of factors, including skyrocketing prices and higher mortgage rates. In the last year alone, the median price of a single-family existing home increased by more than 23%.

Metro markets across the United States have been hit particularly hard, with 80% of them reporting double-digit price increases. The limited inventory of homes available for sale has also contributed to price increases.

Impact on Low- and Middle-Income Workers

The decline in home affordability disproportionately affects low- and middle-income workers. The NAR Chief Economist has commented that the market is becoming more difficult to navigate for these workers.

With stagnant wages and rising home prices, many are being priced out of the market altogether. The housing market is a critical barometer of economic health since it creates jobs and drives consumer spending, and the current trend of rising prices will continue to have a significant impact on the general economy.

Existing-Home Sales Decline

Despite the gloomy outlook, there is some positive news on the horizon. Existing-home sales, which had been increasing steadily for months, have started to decline.

In the last few months, there has been a five-month decline in existing-home sales. While existing-home sales decline might not sound like good news, it does provide buyers with some relief.

Fewer sales can result in a reduction in home prices in certain areas or for certain types of homes.

Fluctuation in Mortgage Rates

Mortgage rates have been fluctuating, with some forecasts suggesting that it could fall to 4.5% by the end of 2022. Fluctuating mortgage rates can provide buyers with some relief, given that a lower mortgage rate can make monthly payments more affordable.

High Inflation and Home Prices

Inflation has been running at its highest since 1981, contributing to the rise in the cost of buying a home, which has reached its highest point since 1989. The median price of a single-family existing home has reached a record high of $413,500.

Metro markets have reported double-digit price increases, which have resulted in even higher home prices for those looking to buy.

Potential Relief for Home Buyers

Despite the challenging environment, there is some potential relief for home buyers. The decline in existing-home sales and fluctuating mortgage rates can make buying a home more affordable for many.

Furthermore, with reports suggesting that there may be a decline in mortgage rates by the end of 2022, now may be an ideal time to invest in the housing market.


The decline in home affordability, coupled with high inflation and rising home prices, has affected both low- and middle-income workers. However, fluctuating mortgage rates and declining existing-home sales represent a glimmer of hope for homebuyers.

With the right approach and some good market intelligence, it may still be possible to enter the housing market, despite any challenges. In conclusion, the decline in home affordability is a pressing issue that affects both low- and middle-income workers.

The main contributors to this issue are family incomes, mortgage rates, and sales prices, which have all undergone significant fluctuations in recent years. There are positive signs on the horizon, such as the decline in existing-home sales and the fluctuations in mortgage rates.

However, high inflation and rising home prices continue to pose significant challenges. As the housing market continues to evolve, potential buyers should stay informed and remain vigilant to find opportunities amidst the changing landscape.

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