Thursday, January 15, 2009

Mortgage Rates Fall to Record Low of 4.96%, Housing Affordability Surges to Record High

Mortgage rates fell today to an historic record-low of 4.96% (see chart above), "the lowest mark since Freddie Mac started tracking the data in 1971." That should help push the Housing Affordability Index (HAI) to a new estimated record high level of 163.1 in January (see chart below). The National Association of Realtors (NAR) has HAI data through October 2008, and I have estimated the HAI for November, December and January using the NAR methodology.

A HAI of 163.1 would mean that the typical household earning the median family income of $60,840 (estimated) in January would have 163.1% of the qualifying income to purchase a median-priced existing single-family house ($181,000 - estimated for January) with a 20% down payment, which would be the highest level of housing affordability in history.

Stated differently, the annual qualifying income required to purchase a median-price house (with a 20% down payment) is only $37,296, with monthly payments based on a 4.96%, 30-year fixed-rate mortgage ($777 per month for principal and interest). Given the median family income of about $60,840 (est.), the typical family would have 163.1% of the income required to qualify for the mortgage to purchase the $181,000 home.


At 1/15/2009 11:58 PM, Anonymous Anonymous said...

so AFTER the freddie/fannie failures, housing is now affordable

At 1/16/2009 2:16 AM, Anonymous Anonymous said...

Doesn't matter if it is affordable if you can't get a mortgage.

At 1/16/2009 10:04 AM, Blogger Dave Narby said...

If you think it's affordable now, just wait three years from now!

Housing will have bottomed, and we'll be trapped in a Japanese-style 0% prime rate trap!!!

At 1/16/2009 11:50 AM, Blogger misterjosh said...

I honestly don't know how people save up a 20% down payment ($36,000)on $37,296.

At 1/16/2009 7:54 PM, Anonymous Anonymous said...

misterjosh said:

"I honestly don't know how people save up a 20% down payment ($36,000)on $37,296."

Two Americas.

If your parents owned a home, there's a high probability you will own a home as well.

If your parent didn't own a home, your prospects aren'so good.

A stat I'd like to see: what proportion of "poor" homeowner households actually bought their home in arms-length transactions at a time they were poor, what proportion bought their home in arms-length transactions at a time they were NOT poor, and what proportion acquired their homes under preferential conditions (e.g. inherited, or acquired from family members at favorable price and/or terms.


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