Interest Rates Are Down – Could a Home Purchase Cost More?
Payments v Price
A recent report of the Housing Affordability Index from the National Association of REALTORS® shows an interesting trend taking place this year that warrants your attention. Most people know that the mortgage rates are still at incredibly low rates, so they don’t feel there is much sense of urgency.
This report shows that mortgage rates have fallen from 4.37% in January to 3.81% for June. However, the report shows that a house payment as a percentage of income has gone from 12.1% to 13.9%. This simply means that buyers have to spend more of their income on a home.
Home Prices are on the Rise
The median price of homes nationally has gone from $154,600 in January to $190,100 in June, which is a 23% increase. The two major components of housing affordability are:
- Home Prices
- Mortgage rates
Even if one of those components is going down, the other could have a significant effect on your mortgage payment, as is shown in this year’s trend in housing affordability.
Home buyers and investors who have been taking a “wait and see” approach need to decide whether now is the time to act.