While sales to first-time homebuyers continued to slow in Q1, we believe that the rebound in housing affordability is continuing as lower interest rates at the end of Q1 are passed to borrowers and interest rates on government loans catch up to those on conventional loans. Home price growth also has cooled in the past few months as housing demand has slowed while inventory has increased. Wage growth also has accelerated, giving potential homebuyers more purchasing power.
If affordability continues to improve, it should help both first-time homebuyers and repeat buyers in the current home selling season. That being said, inventory also remains quite low in Q1, and could easily fall again once demand recovers.
It also is unclear if homebuilders will be able to increase the number of low-priced single-family homes affordable to first-time homebuyers. Without an increased supply of affordable new homes, home prices could easily re-accelerate, slowing the growth of home sales to first-time homebuyers.
Longer term, the housing industry must find solutions to keep homes affordable without being overly dependent on monetary policy support and cooling housing market conditions. That means looking for solutions to lower the cost of building, buying, selling and financing homes.