Home prices are appreciating. You may think that this would cause monthly mortgage rates to increase. However, despite rising prices, the current historically low mortgage rates are making homes MORE AFFORDABLE than ever. According to the Mortgage Monitor Report from Black Knight, a premier provider of mortgage data and analytics, “While home prices have risen for 97 consecutive months, July’s record-low mortgage rates have made purchasing the average-priced home the most affordable it’s been since 2016.” Are you curious to find out how this could be possible? Michele Harmon Team is here to give you the answer.
Reduced median in monthly income requirement
Most lenders require that you spend less than 28% of your gross income on housing, in addition to less than 36% on total debt payments. Black Knight found that “as of mid-July, it required 19.8% of the median monthly income to make the mortgage payment on the average-priced home purchase, assuming a 20% down payment and a 30-year mortgage. That was more than 5% below the average of 25% from the years 1995-2003.
What does this mean?
The average priced home requires a $1,071 monthly payment. This is down 6% from the same time last year despite homes increasing in value by more than $12,000. In other words, as a home buyer, you can spend about $32,000 more on a home than you could at the same time last year while keeping your monthly payment the same. If you found that you were unable to purchase last year or this past spring due to the slowdown from the pandemic, this is GREAT news for you!
Mortgage rates hit an all-time low
If you read last month’s blog, Should I take Action Towards the Historically Low Mortgage Rates?, you may be familiar with how beneficial the current rates are. To sum things up, borrowing money is less expensive right now. This allows your future home to be significantly more affordable over the lifetime of your loan. According to Mark Fleming, Chief Economist at First American, “House-buying power got a big boost as the 30-year, fixed mortgage rate made history by moving below three percent. That drop in the mortgage rate from 3.23 percent in May to 2.98 percent in July increased house-buying power by nearly $15,000.”
Check out the picture below to see the last time housing was this affordable and click here to read our blog on the historically low interest rates.
If you have been considering a move, now is the best time due to the current affordability from low mortgage rates. If you are thinking of purchasing your first home or moving into a new one, Michele Harmon Team can help. Call us today at 713-818-1330. It would be our pleasure to help you find your next home!