Homes are in fact more affordable now compared to what they were in the late 1990s, as reported by the latest Mortgage Monitor Report by Black Knight Inc., a mortgage data and performance information provider.
Homes more economical now than 20 years ago
Mortgage rates have declined 40 basis points during the last 6 months, however the majority of the possible savings is offset with the accelerating rate of home price appreciation throughout the country.
“Rising home prices continue to offset the majority of would-be savings from recent interest rate declines, which has kept affordability near a post-recession low,” says Ben Graboske, executive vice president of data & analytics for Black Knight. “That being said, when viewing the market through a longer-term lens, affordability across most of the country still remains favorable to long-term benchmarks.”
As of September, 21.4% of the median income nationwide was forced to purchase a median-priced home. From 1995 to 1999, that percentage was 24.2%, and from 2000 to 2003 it was actually 26.2%, according to Black Knight’s report.
While the monthly payment required for a median-priced home is up $100 from a last year, the national “payment-to-income” ratio remains 2.8% below averages from the late 1990s, in accordance with the report.
“In looking at the affordability landscape across the country, we certainly see varying levels of affordability in each market compared to their own long-term benchmarks,” Graboske says. “But, by and large, the overall theme is that affordability in most areas, while tightening, remains favorable to long-term norms.”
Black Knight researchers note that 47 of 50 states’ payment-to-income ratios remain below their 1995-2003 averages. Hawaii, California, Oregon, and Washington, D.C., may be the lone exceptions, where payment-to-income ratios are higher today than their long-term benchmarks.
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