Housing Market Is Most Affordable

According to Black Knight, as mortgage rates revolved up and down of 3% in July, homebuyers received their biggest boost in affordability in three-and-a-half years. 

The purchasing power went up by 10% year-over-year despite 97 straight months of annual housing price increases.

With interest rates hitting rock bottom low, buyers were able to afford $32,000 “more house” as of July 23 than they could afford the previous year with the same monthly payment.

Purchasing the average-priced home in mid-July required $1,071 per month — assuming a 20% down payment and a 30-year loan — or 19.8% of the nation’s median income. 

This compares to 21.3% the year before and an average of 25% between 1995 and 2003.

Ben Graboske, president of Black Knight’s data and analytics division, said in a press release, “Falling rates and improved affordability have helped to encouraged home buying demand, and thereby purchase origination volume,  which has provided a much-needed backstop for home prices in the wake of the COVID-19 pandemic.”

Buying the average-priced home reached the most affordable level since late 2016 across the country. With few states like — Arkansas, Iowa, Kentucky, Louisiana, Maryland, and West Virginia — becoming their most affordable since before 1995.

“The main takeaway from this month’s report is that while record levels of job losses are casting a shadow on the housing market and on the economy, for those shopping for a home now, buying power has clearly trended up,” said Graboske.

Rates falling below 3% incentivized a record of 18.1 million qualified homeowners to refinance. 

That number would expand to 19.5 million borrowers if rates hit 2.875%. About 15.6 million met the underwriting criteria when rates went to 3.01% on July 23. 

Those considered qualified are current on their mortgage, will gain at least 75 basis points through a refi, have a maximum 80% loan-to-value ratio, and a 720-plus FICO score.