Getting a home in Puerto Rico is getting harder – NotiCel – The truth is – Noticias de Puerto Rico – NOTICEL

This is reflected in the Affordable Housing Index


Buying a home in Puerto Rico remains difficult due to higher interest rates, higher house prices and lower household income due to inflation, as evidenced by the Affordable Housing Index, which fell to 60% in June of this year.

“The index, which reached a maximum of 100% in March 2020, has been consistently flat,” noted Economist Leslie Adams, Director of Analysis and Public Economic Policy for Technical Studies (ETI), who is responsible for estimating this indicator. Deteriorating so far this year.

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His 60% position for June 2022, he said, represents a 40 percentage point drop since March 2020. “Basically, what the index tells us is that the typical household has only 60% of the income needed to qualify for a mortgage loan, if the down payment is considered. 20% is a conservative assumption.

He explained that the Affordable Housing Index, prepared by ETI, measures whether or not a typical household that contributes 20% down payment to buy a home qualifies, based on average income, for a mortgage.


Affordable Housing Index

Photo: Introduction

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.

Adames reported that the index settled at 65% in March 2011, and gradually improved to 100% in 2020 due to the low interest rate environment and declining home prices that prevailed in the market until 2014.

However, he said these trends have reversed in the past couple of years and there appear to be no signs in the economy of a positive shift that will improve housing affordability anytime soon. He noted that in March 2022, the index was at 69% and now it has fallen to 60%, which is the lowest level in more than a decade.

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The housing supply problem that still exists in the real estate market is clearly visible. This, and the boom in demand for housing at prices still considered reasonable relative to the peak market, as well as low interest rates, are putting pressure on prices. However, this has changed and not for the better. The Federal Reserve reduces liquidity in the financial system by reducing its balance sheet (“quantitative tightening”), a situation that would contribute to an increase in medium and long-term interest rates. Adams said the 30-year fixed-rate mortgage rate had already stabilized at 5.52% in June, compared to 5.23% in May and 3.45% in January of this year.

He added that the picture is complicated for those who want to buy a house because new homes are more expensive. He concluded that “inflation in building materials has increased the cost of construction, which will lead to a higher cost of newly built homes for residents whose purchasing power is still under pressure due to the inflationary spiral facing the island.”

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