Affordability takes another hit with highest mortgage rate since 2008


This is an updated version of the second quarter affordability index first released in late June.

The housing market reached something of an inflection point in early September. The average weekly rate for a 30-year mortgage has risen to 5.7%. Mortgage Daily News reported the same day that home buying costs were up 6%. Local mortgage originators said many of the local home loans were granted at 6.5%. According to Attom Data Solutions, loans to purchase a home in the Tri-Cities were down 25.1% compared to the same period last year.

Nadia Evangelou, senior economist and director of forecasting for the National Association of Realtors (NAR), said last week that data shows the typical family in the United States can no longer afford to buy a home at the median price. when mortgage rates increase by more than 5.7%. At this rate, the typical family must devote more than 25% of its income to the mortgage payment. That’s minus the cost of mortgage insurance, home insurance, taxes and maintenance. It’s also based on a median US home price of $428,500. The closest local market to that in August was Piney Flats at $421,500. The median price in most local markets is a bit lower than the US median. August’s detailed analysis of city and community existing home sales and prices is available on the NETAR website at https://netar.us/tri-cities-hot-housing- market-shows-some-cracks/’

At the end of June, the Affordability Index for the two main Tri-Cities housing markets indicated that affordability had fallen to record lows. Sullivan’s median home price payment is 50% higher than last year. It’s 3.5% higher in Washington Co, according to Attom Data Solutions. An updated version – the third quarter report – will be available later this month.

The median sale price of existing homes in the Tri-Cities area has risen 2.5% since June, and wages continue to lag sales price and rent increases.

In the second quarter report, Washington Co. has the dubious distinction of having a housing market where the average worker cannot qualify to buy a median-priced home using conventional financing standards of a $20 down payment. % and an initial income of 28%. – rate of endettement. The typical buyer must also spend more than 30% of their income on housing. The Department of Housing and Urban Development defines 30% or less as the benchmark for affordable housing. The suggested level of spending on housing is 25% of an individual’s or family’s income.

Sullivan did not fall to the same status as his southern neighbor due to higher wages and slightly lower house prices. But its affordability index has declined over the past 15 quarters.

Buying a local home has become much more difficult in recent months. Local markets achieved recovery status after the Great Recession in 2016 and began their current rage in 2018. Sales since then have absorbed the area’s existing home inventory faster than the market has replenished it. At the same time, the region’s new domestic industry was still operating at less than half of its 2006 peak capacity. This picked up again after the country’s largest builder – DR Horton – moved into the area. It now dominates the volume of new housing permits.

At the end of May, just over one in 10 homes in the Tri-Cities area fell within the affordability range. Another 53% were above and about 40% were at a lower price.

Higher prices and less inventory have also pushed local rents to record highs.

Atom’s analysis found that single-family homes and condos are less affordable in 547 (97%) of the nation’s 575 counties, with enough data to analyze.

“Extraordinarily low levels of homes for sale combined with strong demand have driven home prices up over the past few years,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “But homes have remained affordable due to historically low mortgage rates and rising wages. With interest rates nearly doubling, homebuyers are facing monthly mortgage payments 40-50% higher than they were a year ago – payments that many would-be buyers can’t quite afford. simply not afford.

The report determined affordability for average earners by calculating the income needed to meet major monthly homeownership expenses — including mortgage, property taxes and insurance — on a median-priced single-family home, assuming a deposit of 20% and a maximum of 28%. “initial” debt-to-income ratio. This required income was then compared to annualized average weekly wage data from the Bureau of Labor Statistics.

Down payment trends worsen the image of local payments and affordability. Attom says the typical down payment for a median-priced home in the Johnson City metro area was 8.4% in the first quarter. It was 5.2% in Kingsport-Bristol. It had risen to 9% by the end of the second quarter in the Johnson City metro area and 5.5% in Kingsport-Bristol. Buyers who do not make a down payment of 20% or more must purchase private mortgage insurance (PMI). PMI costs typically range from 0.5% to 1% of the loan total. The cost varies, but you can add hundreds of dollars per month to the mortgage.

SULLIVAN CO.

During the second quarter, the typical mortgage payment for a median-priced home was $995, up 50% from a year ago. Buyers who had not made a down payment of 20% or more were required to purchase PMI, which increased their monthly payment.

Sullivan’s annualized weekly salary was $55,549 and the annual income needed to buy with a 20% down payment and an initial debt-to-income ratio of 28% was $42,634. Thus, the average worker could qualify to buy.

The percentage of income to be purchased was 21.5%.

WASHINGTON CO.

During the second quarter, the typical mortgage payment for a median-priced home was $1,222, up 35% from a year ago. The annualized weekly wage for county workers was $48,516 and the wage needed to qualify to buy was $52,379; thus, the average worker would not qualify to buy a median-priced home.

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