US housing is just at an average level of affordability – Goldman Sachs

Marty Young, Research Analyst at Goldman Sachs, suggests that industry housing affordability indices suggest US homes are currently much more affordable than historically normal.

Key Quotes

“We think these measures overstate affordability because they are based on nominal rather than real interest rates and because they use house price data that understate historical price inflation.

On our analysis, US housing is just at an average level of affordability historically. However, according to a cross-country comparison, US housing looks relatively affordable having seen milder house price inflation than many other DM countries over the past two decades.

We look for US house price appreciation to decelerate from 5% in 2015 to 4%, 3% and 2% in 2016, 2017 and 2018.”