Rate Increase Will Have Major Impact on Housing Affordability

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mortgage rates rise by 1% over the course of the next 3 years, housing in 21 out of 25 biggest markets in the country will become unaffordable for the American earning the national median income. This conclusion was reached in The Outlook: In MBS and Securitized Products report released by Deutsche Bank.

The analysts of Deutsche Bank estimated that an increase in the mortgage rates of 1% will result in monthly mortgage payments which are 12.5% higher for borrowers earning the median income in the U.S. This income is currently $53,000 per annum.

The report is based on a normalized affordability index. If mortgage rates go up by 1%, the index will drop below 100 for 21 major markets. The markets which are expected to have the lowest housing affordability levels in this case are Los Angeles, San Francisco, Oregon, Miami, Seattle, Santa Ana, Philadelphia and Riverside. The markets which are projected to experience the largest drops in affordability include San Jose, Sacramento, San Diego, New York and San Francisco.

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Currently, housing affordability in 20% of local markets is lower than the historic norms. This was revealed in the latest housing market report of RealtyTrack for October 2014. The report covered 475 counties in the United States.

The analysts of RealtyTrack estimated that on average 26% of the median income is required to purchase a median-priced home given the present mortgage rates. This is lower compared to the base month of January 2000. Back then, a share of 28% of the median income was necessary for buying a home with median price. At present, housing is more affordable than it was during the market bubble years. Back then, a share of 41% of the national median income was needed for the purchase of a house with a median price.

Jessie

Jessie

Jessie Jessie is a corporate communications and public relations professional skilled in media relations, strategic communications, crisis and issues management, writing and editing. She excels in managing multiple, high-priority tasks and working in high-stakes environments. Jessie has more than 10 years experience writing editing both print and online content. She is a graduate of Illinois State University with a Masters degree in English and writing.

Contact: jessie@mortgage.info
Jessie

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