The Affordable Housing Index, compiled by Technical Studies Inc. , in March of this year, after the continued rise in housing prices and the deterioration of the purchasing power of consumers due to inflation, making it difficult for them to qualify for loans. Mortgages.
Economist Leslie Adams, director of economic analysis and policy at ETI, reported that “in recent months the affordable housing index has deteriorated to 69% in March 2022, a decline of 31 percentage points since March 2020. In other words, the typical household has only 69% of income. Necessary to qualify for a mortgage, taking into account a down payment of 20%.”
The Affordable Housing Index, compiled by ETI, measures whether a typical household that contributes a 20% down payment to buy a home qualifies, based on median income, for a mortgage. A value equal to 100% means that the household has the necessary income to qualify for a mortgage based on the average market rate. A value above this limit assumes that you have enough income to qualify for a mortgage, while values below this limit reflect the opposite.
Adams explained that this indicator reached 61% in January 2011 and was gradually improving, reaching a maximum of 100% in March 2020. This improvement is attributed to the historically low levels of interest rates that prevailed in the market during this period, as well as the price correction experienced by it. real estate market “.
“There is no doubt that the increase in average home prices and the deterioration of purchasing power due to inflation is already affecting people’s ability to buy homes. Figures from the Office of the Commissioner of Financial Institutions show that total contracted home sales increased from 3,286 in the first quarter of 2021 to 2,776 in the first quarter of 2022, mainly due to a 18% contraction in housing sales., the economist commented.
Adames noted that the index reflects that the latest figures published by OCIF as of March, considered an average selling price of $193,813, and a 30-year fixed interest rate of 4.17% for the month of March. “The panorama could be complicated next year if the upward trend in 30-year fixed-rate mortgage rates continues. This rate has already exceeded 6% and will be an additional factor that will increase pressure on housing affordability in the market local, and therefore on the origin of the mortgage and home sales.”