New research shows that changes in mortgage rates have a greater impact on affordability than changes in home prices or income, and that homes in the U.S. are basically the most affordable they’ve been in the last 40 years.
Since 1990, housing in all but three of the 10 metros found to have the highest price growth in the study became more affordable. Denver, Portland, Oregon, and Miami became more unaffordable when comparing actual prices and median household's affordable price, per Trulia. San Francisco, Austin, and Seattle increased their affordability from 1990 to 2016, while being much more expensive.
It’s not your father’s housing market, at least regarding mortgage rates – and that’s a good thing. In the 1980s, the country was experiencing massive inflation. The Federal Reserve responded by driving up interest rates, which in turn led to mortgage rates in the sustained double digits, up to 16.6 percent in 1981. The median home price was $136,156, while the median income could only afford a home price of $97,832.
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