PDA

View Full Version : Mortgage rates up...affordability down



mlk_man
03-13-2006, 08:42 PM
Disclaimer: Even though I post this article, it does not mean I neither agree nor dis-agree with it. I will post an opinion at the end of though.........

"Mortgage rates up...affordability down
Interest rates are the highest in years, helping to make housing markets even more overvalued. See rankings for 299 markets.
By Les Christie, CNNMoney.com staff writer
March 13, 2006: 6:44 PM EST

NEW YORK (CNNMoney.com) - Mortgage rates have hit their highest level in nearly four years, and that has a direct impact on home affordability...and home prices.
The average rate on a 30-year fixed mortgage stands at 6.37 percent, up from 5.58 percent last summer.


"I think it's indisputable that demand in the housing market has declined in the past few months," says Richard DeKayser, chief economist for National City Corp., an Ohio-based mortgage banker. "It's very clear that rising interest rates figure very large in that decline."
Rising rates had already begun to take their toll in the fourth quarter of 2005, when the 30-year mortgage averaged 6.22 percent, according to a report released Monday from Global Insight, a financial information provider, and National City.
The report figures 71 of the 299 largest U.S. housing markets were "extremely overvalued" at year's end, up from 62 markets a quarter earlier (see table rankings below).
The report arrives at a fair market value based on population, income and interest rates and factors in historical premiums or discounts.
Rates have a direct affect on affordability. For example, a jump in interest rates from 6 percent to 7 percent on a 30-year loan adds about 10 percent to a monthly mortgage bill. A homeowner who financed a loan of $200,000 at 6 percent would pay about $1,200 a month. At 7 percent, the bill would come to $1,330.
As rates rise, homebuyers who were already stretched may start demanding lower prices. "Low rates had offset unaffordability in past years," said DeKayser.
California and Florida accounted for 18 of the 20 most overvalued markets, with Naples, Fla. leading the way. A median home in Naples now costs $367,100, according to the Office of Federal Housing Enterprise Oversight (OFHEO), nearly double what the study's authors estimate it should.
Undervalued markets are much less common and tend to be priced only slightly below where they should. They're especially common in Texas; eight of the top 10 are in the Lone Star State. College Station leads the way -- homes there cost 22.7 percent less than what the authors estimate they should fetch."

If Texas A&M wins the tourney, I bet prices go up...............:p

You can "qoute" me on that Fivetears............

M_M