Even the slightest movement in mortgage rates can translate into more – or less – purchasing power for home buyers.
John Burns Real Estate Consulting recently looked at how the fluctuation in rates effects the average consumer. The firm found that a typical family earning $60,000 a year could afford around $1,800 month for the mortgage payment.
In 2000, a 30-year fixed-rate loan, which averaged an 8 percent mortgage rate, would have qualified that family for a $245,000 loan.
But at a 4 percent mortgage rate – which current rates are averaging – that same family can qualify for a $377,000 loan.
“In other words, each 1 percent drop in interest rates in the last 15 years has allowed home sellers to raise the price 12 percent,” according to Jon Burns analysis.
Source: “How Tiny Mortgage Rate Moves Can Buy You a Lot,” CNBC (March 10, 2015)
Tighter lending standards by banks are disqualifying potential home buyers and preventing them from buying homes, at least according to analysts who point to that reason behind the second-quarter home ownership rate falling to its lowest level since 1998. The home ownership rate stood at 65.9 percent in June, its lowest in 13 years, the U.S. Census Bureau reports.
“Tight underwriting standards and the lack of a down payment are keeping a big chunk of buyers out of the market and other people are being displaced by foreclosures,” Wayne Yamano, director of research at John Burns Real Estate Consulting in Irvine, Calif., told Bloomberg News.
More at source: “U.S. Homeownership Falls to Lowest Since 1998 on Tight Lending,” Bloomberg News (July 29, 2011) and “Home Ownership Plunges to 13-Year Low, Bust,” Investor’s Business Daily (July 28. 2011)
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