Housing Affordability Remains Stretched Amid Higher Interest Rate Environment

January 11, 2024--Prospective home buyers face high prices and elevated borrowing costs, while homeowners refrain from listing their properties
As global central banks raised interest rates to tame inflation, home prices have cooled relative to the start of the hiking cycle.

However, despite the sensitivity of the residential market to higher policy rates, prices are still above historical averages. Home prices in advanced economies, including most European Union countries, as well as Africa and the Middle East are 10 percent to 25 percent higher than pre-pandemic levels.

Rising interest rates have passed swiftly to residential mortgage markets, impeding affordability for current and prospective home buyers. Additionally, scarce home supply is limiting purchases in some regions. In all, housing affordability is more stretched amid still-elevated home prices and higher interest rates.

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