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Home Prices Still Rising, But Still Affordable

Home prices may have been on the rise the last few years, but homes are still more affordable now than they were in the pre-bubble years, according to the latest Mortgage Monitor Report released by Black Knight Financial Services. Households are using 21 percent of the national median income to pay a home loan on a median-priced home. In 2000-2002, the average payment-to-income ratio was 26 percent, and in 2006, it was 33 percent.

However, Black Knight’s report warns that if home prices continue to increase – as they have year-over-year for 43 consecutive months – the affordability picture in home ownership could start to change in two years. Black Knight factored in a continuing 5.5 percent annual home price appreciation as well as interest rate rises of 50 basis points a year. Under that scenario, “we see that in two years home affordability will be pushing the upper bounds of that pre-bubble average,” says Ben Graboske, senior vice president at Black Knight Data and Analytics.

Source: Black Knight Financial Services

Note: The answer to rising home prices and rents? Buy now as a home provides inflation protection!

The Markets

  • Rates on home loans were unchanged last week, holding close to 2015 lows.
  • Freddie Mac announced that, for the week ending February 18, 30-year fixed rates remained unchanged at 3.65%.
  • The average for 15-year loans also remained unchanged at 2.95%.
  • The average for five-year adjustables increased slightly to 2.85%. A year ago, 30-year fixed rates were at 3.76%, slightly below today's levels.
  • Attributed to Sean Becketti, chief economist, Freddie Mac -- "After another week of financial market oscillations driven by rumors of potential limits on oil production, the 10-year Treasury yield edged up 5 basis points, and the 30-year fixed rate on home loans remained unchanged at 3.65 percent. Despite this week's uptick in Treasury yields, the 10-year is still 54 basis points lower than it stood at the end of 2015, while the 30-year fixed rate has dropped only 36 basis points over the same period."

Note: As of January 1, Freddie Mac is no longer providing survey data for 1-year adjustables.

Rates indicated do not include fees and points and are provided for evidence of trends only.  They should not be used for comparison purposes.

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