SEATTLE–In order for a typical home to be affordable to a buyer, mortgage rates would need to drop to 4.43%, according to a new estimate from Zillow.
But “that kind of a rate decline is currently unrealistic,” noted economic analyst Anushna Prakash in a report.
In fact, not even a 0% interest rate would make a typical home affordable in New York, Los Angeles, Miami, San Francisco, San Diego, or San Jose, according to Zillow.
According to Fortune, Prakash’s analysis holds income, home prices, and all other housing-related costs equal.
‘Crux of Issue’
“This gets at the crux of the ongoing issues of the U.S. housing market: There are a variety of factors that affect housing affordability,” Fortune said in its report on the Zillow analysis. “And even if one were to change drastically, it wouldn’t result in a sudden affordability surge for hopeful home buyers.
“While lower rates certainly help, they are just one piece of a far more complex puzzle that includes inventory shortages, wage stagnation, and rising insurance and tax costs,” James Schenck, CEO of PenFed Credit Union, told Fortune. “In other words, housing affordability is about more than just the Fed—it’s about the full ecosystem of access and equity.”
Homes Still Selling
The report further notes that even in “markets that have seen a heavy correction and have lost 10% [or more] of value, homes are still selling for a higher percentage of people’s average income, making them feel more expensive than they did five years ago.”
