Falling mortgage rates have been welcome news for home buyers. But they also carry a downside.
Just as home loans have become more affordable, house prices have been surging at a troublingly fast pace. For most of the past seven years, price growth has eclipsed Americans’ average wage gains. This has caused housing affordability to worsen for would-be buyers
These pressures were easing for much of this year as wage growth picked up and home price gains slowed. But the gap just blew up again in September, according to the National Association of Realtors. The median sales price of an existing home
jumped 5.9% over the past 12 months to $272,100. Home prices usually peak
in the summer and then decline during the colder months. But the annual jump appears to reflect the full percentage point decline in the average 30-year mortgage rate — to 3.61% in September.
Sellers were able to adjust their asking prices to the increased demand caused by lower mortgage rates.