It is important to recognize that only a handful of inflated sales prices can buoy a community of homes. We can already see the pressure in a marked reduction in the participation in first-time buyers (to under 30% of national sales from 40% a year ago). Real estate maven Mark Hanson has estimated that first-time buyers' volume is down 60% to 70% in the last two and a half years.
Almost as significant as higher home prices is the accelerated rise in conventional mortgage rates -- almost unprecedented in terms of percentage off the lows but still low by historical standards.
But it is important to recognize that the absence of exotic loans available in this cycle compared to the previous cycle means that purchasing power has been markedly lowered. (The traditional housing affordability indices don't properly take this into account.)
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