Affordable homeownership opportunities are returning with a vengeance, according to new data released by Black Knight Inc.
Home affordability briefly hit a 32-month high
in early September, Black Knight noted, when interest rates dipped below 3.5 percent for a single week. By the end of September, the average 30-year interest rate was 3.64 percent, which meant that homeowners would need to devote 20.7 percent of the national median income to make monthly principal and interest payments on the average-priced home. That level was the second lowest national payment-to-income ratio in 20 months, behind only August 2019, Black Knight added.
“Back in November 2018, we were reporting on home affordability hitting a nine-year low,” said Black Knight Data & Analytics President Ben Graboske. “Interest rates were nearing 5 percent, pushing the share of national median income required to make the principal and interest (P&I) payments on the purchase of the average-priced home to 23.7 percent.”
Graboske observed that the “decline in rates since November has been enough to boost buying power by $46,000 while keeping monthly P&I payments the same.” He also pointed out that annual home price growth held flat in August at 3.8 percent after rising in July for the first time in 17 months. It remains to be seen if this is merely a lull in what could be a reheating housing market, or a sign that low interest rates and stronger affordability may not be enough to muster another meaningful rise in home price growth across the U.S. That the strongest gains in–and strongest levels of–affordability were in August and early September could bode well for September/October housing numbers.”