For this month’s newsletter, Dr. Goss of Creighton focuses on the changing housing prices in the United States. Comparing the last 3 years, Goss notes a spike in mortgage rates and housing prices that he believes have led to a higher rate of renting over home buying. He noted a 4% spike in the 30-year mortgage rate in the last few years, leading to a high 7%, as well as the average cost of homes creeping up towards the $400,000.

He states that the national affordability of homes has fallen to a record low 91.7. The Housing Affordability Index is a way of measuring how likely the typical American family could be able to qualify for a mortgage loan on the current market. According to the National Association of Realtors, any value over 100 means that a family with the medium income (which as of 2022 was roughly $74,500) then they would have just enough money to be able to receive a mortgage on a median-priced home.

Goss also cites the fact that few older homeowners are willing to give up their homes to refresh the market as part of the reason that the housing affordability is so low, “driven by existing homeowners resisting leaving their low interest rates”.

Pivoting towards his monthly forecast, Goss expects short-term interest rates to remain unchanged until June at the Federal Reserve Open Market Committee’s next meeting. He also believes that the 30-year mortgage rate will continue to rise towards 8% throughout the next year. He recommends keeping an eye on the 10-year US Treasury Bond, saying that anything outside of 3.9% - 4.6% will be “a warning signal”. He does not believe that the Fed will consider any rate cuts for their March meeting, as the current estimates for the GDP for the first quarter of 2024 is 3.7%.