Black Knight Financial Services says that with home prices getting higher year-over-year, the firm believes there will come a time when homes would become unaffordable.
According to Housing Wire, a recent Mortgage Monitor report by Black Knight revealed that home prices have increased in a year-to-year comparison for 43 months straight. This is making Black Knight question the affordability of homes in the coming years. However, current home prices are still relatively affordable for homebuyers despite the fact that it is eating up 21 percent of household income to pay for the mortgage on an average priced home. However, the report reinforced the industry outlook that this is 20 percent less than the 26 percent average payment-to-income ratio which was notable back in 2000-2002. It is also down significantly by 33 percent compared to the height of the market in 2006.
Fitch Ratings added that the mortgage rates will raise high by 25-50 basis points at the end of this year. With this data Black Knight and analytics Senior Vice President, Ben Graboske made a hypothesis that in two years, home affordability will be increasing. He added that on the state level with the same scenario, eight states would be less affordable compared to 2000-2002 levels within 12 months and 22 states would be added within 24 months.
It is also noted in the report that the monthly mortgage payment would be $240 more, requiring 26.5 percent of household income to push the upper boundaries of pre-bubble averages by the end of 2017.
Meanwhile, in a report by Investor's Business Daily, the U.S. luxury real estate market has taken a hit as economic problems from various parts of the world have affected sales across the country. Dan Conn, CEO of Christie's International Real Estate said, "There's volatility in China and Russia and there's the oil issue in the Middle East - I have no doubt there's an impact overall on the market. You're not going to see material price increases in most markets."
