Interest Rates Drop; Affordability Rises

Housing affordability up eight percent in the last four weeks

According to a recent press release at Freddie Mac, “Mortgage rates decreased for the fourth consecutive week, due to increasing concerns over lackluster economic growth,” says Sam Khater, Freddie Mac’s Chief Economist.  “Over the last four weeks, mortgage rates have declined three quarters of a point, the largest decline since 2008.” 

Freddie Mac notes that a 30-year fixed rate loan averaged 6.33% on December 8 versus 6.49% the week prior.  Fifteen-year rates dipped to an average 5.76% from last week’s 5.76%.

Still, says Khater, “While the decline in rates has been large, homebuyer sentiment remains low with no major positive reaction in purchase demand to these lower rates.”

The National Association of Realtors notes that interest rates hovering around 6% increase affordability.

A typical family still finds a median-priced home unaffordable because the qualifying income amount for such a home currently exceeds their earned income.  However, should rates reach 6% the typical family’s earned income will surpass the qualifying income to buy this same home by $1,000.

Housing affordability is up 8% in the prior four weeks as rates have dropped, making homeownership a reality for more consumers.

Notes the post, “With more buyers back…the housing market may turn around at the beginning of the new year.”

Are you ready to shop for your new home in this environment of dropping interest rates?

Post authored by Lora Bray.

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