Oxford Economics: Why the worst of U.S. housing affordability may be behind us

Housing affordability deteriorated in 2022 by the most since the housing crisis and rebalancing is needed to foment healthier market dynamics. But supportive structural factors mean a major correction in house prices is unlikely, according to Oxford Economics.

Its U.S. national Housing Affordability Index (HAI) rose 10 basis points quarter-over-quarter to 118 basis points in fourth quarter from 108 basis points in third quarter, reaching a new historic high and meaning that prices were 18 percent above the borrowing capacity of median income households. Oxford Economics indices for the Miami (up 14 basis points ) and New York City (up 12 basis points ) metros recorded the largest increases. Meanwhile, affordability improved in areas where it deteriorated the most during the pandemic, such as Boise (down 4 basis points ).

But the firm expects affordability to improve somewhat in the next two years as lower house prices and mortgage rates outweigh the impact of the lower