May 11, 2022
Here is a very important indicator of an impending real estate crash. The ratio of the median home price to median income in the US has reached a historically high level. And unfortunately, this number continues to rise daily with rapidly increasing mortgage rates. Right now, on average, it takes 7.1 years of the median household income in America to buy a home at the current median sale price of a home in America. This affordability level (or lack thereof), is simply not sustainable in any market. But within the context of an Economy with record high Consumer Inflation, record high Producer Inflation, record high Fuel Costs, rapidly declining stock and bond markets, and a deteriorating Dollar, there are few Americans that are not becoming less wealthy by the day.
Topping it all off, the dangerous combination of the economic conditions listed above will lead to higher Mortgage rates. The average 30-year fixed rate mortgage rate has already jumped from 3.11% in January to 5.58% on May 9. With recent losses in the bond markets, updated fed policy and continued inflation, these rates WILL continue to increase. Until this toxic economic pattern shows signs of reversing, the unfortunate reality is that a decline in home values is inevitable.