Housing Affordability
"Median home sale prices surged to a new record high in June, yet housing affordability actually improved compared to a year ago, creating what at first might seem like a paradox," said Realtor.com® earlier this month, citing National Association of Realtors (NAR) data.
"To explain this contradiction, economists point beyond the raw price to a set of shifting economic factors affecting the budgets of today's buyers, with income growth and mortgage rates emerging as the main linchpins," explained the article.
Hmm. Mortgage rates must be doing some hefty lifting there because income growth was modest and was nearly entirely wiped out by inflation.
The Atlanta Fed's Wage Growth Tracker shows that wages grew 3.8% over the 12 months ending in May, the last figure available when we visited the website on Jul. 30. The tracker excludes other sources of income, such as rents, dividends, and yields, and those will be much more important in some ZIP codes than others.
Meanwhile, the consumer price index (CPI) showed prices rising by 4.2% over the same period. So wages rose more slowly than prices over that May-to-May year.
To be fair, the CPI did much better in June than May, rising only 3.5% over the previous 12 months. However, without wage growth figures for that month, we can't do a side-by-side comparison.
Mortgage rates, on the other hand, did fall overall during the June-to-June year. On Jun. 4, 2025, the average rate for a 30-year fixed-rate mortgage was 6.85%. In June 2026, that same rate ranged between 6.42% and 6.49%. All data are weekly averages from Freddie Mac.
Readers may be painfully aware that mortgage rates rose in July and stood at 6.58% on Jul. 22. Those rates have largely been chasing oil prices, which rise and fall depending on whether the news from the Iran conflict is bad or good. Optimism about the prospects for peace talks peaked in June.
National data, such as those from the NAR, are of only limited use to individual owners and buyers of homes. All real estate is local, goes the old saying.
Foreign Buyer Numbers Dwindling, Despite Favorable Exchange Rate
More news from the NAR. Fewer foreign buyers are choosing to purchase homes in the U.S.
The dollar value of the homes they purchased fell 19.1% from April 2025 through March 2026. And the number of homes they bought dropped 14% over the same period.
"The decline in foreign home buyer activity mirrors the decline in international visitors and tourists to the United States," said Lawrence Yun, the NAR's chief economist, in a statement. "Even a slightly weaker U.S. dollar over the past year, which provides more purchasing power for foreigners, did not induce more activity."
Foreign buyers fall into two groups: "Foreign buyers who resided in the U.S. as recent immigrants or who were holding visas that allowed them to live in the U.S. purchased 37,600 homes (56% of all foreign purchases) with a total dollar volume of $21.8 billion," says the NAR report. "Foreign buyers who lived abroad purchased 29,500 homes (44% of all foreign purchases) with a total dollar volume of $23.5 billion."
One glimmer of hope. The FIFA World Cup 2026 brought footage of fans enjoying themselves in the U.S. to TV screens around the world.
Let's hope that helps restore America's image as a great place to live and visit.
Is the Fed on the Right Track?
On Wednesday, the Federal Reserve's rate-setting body, the Federal Open Market Committee (FOMC), met and decided to leave the federal funds rate unchanged. The next day's Wall Street Journal didn't question that decision.
And The Journal positively welcomed the new Fed Chair's post-meeting declaration that he, Kevin Warsh, was determined to return inflation to 2%, not 2-and-a-bit percent.
However, The Journal did raise doubts about the path Warsh outlined to achieve that goal:
"Mr. Warsh ... suggested his no-forward-guidance policy is working. Since his first meeting as Chairman in June, investors have had to relearn how to price risk themselves without being steered by the Fed. One result has been that bond yields are rising across the duration curve. Another is that the dollar has appreciated modestly."
However, a second story in The Journal on Thursday morning questioned Warsh's assertion. It summed up: "Analysts said investors heard a chairman who introduced doubt about his willingness to deliver rate hikes they think may be needed to curb inflation." It backed up the story with quotes from various analysts.
In his post-meeting news conference, Warsh suggested: "market participants are learning to play the ball and not the referee." And that triggered Greg Ip, The Journal's chief economics commentator:
"Warsh’s analogy of the Fed simply calling balls and strikes, borrowed from future Supreme Court Chief Justice John Roberts, doesn’t work. The Fed isn’t a neutral umpire, it is the most important player in the game."
There is bound to be resistance to the changes Warsh implements. Few like change.
But he's very new to his job. Let's hope he's open to recrafting his revolution into an evolution — or that markets learn to adjust.
