The American Enterprise Institute's International Center on Housing Risk released its latest National Mortgage Risk Index, a measure of likely loan default risk rates in the event of another economic crisis. For March, the group calculated that under stress, 11.5 percent of recent home purchase mortgages would default. Potential default rates remain nearly double the 6 percent maximum AEI says is conducive to a stable market, suggesting there's been no discernible impact from Qualified Mortgage regulation.
As AEI points out, while all of the purchase loans covered in its index classify as QM, half have a down payment of 5 percent or less, and nearly one-quarter have a total debt-to-income ratio exceeding 43 percent. Also troubling is that while the composite index was down over the month, expected default rates among loans held by Fannie Mae and Freddie Mac continued to climb up to 6 percent, while loans insured by the FHA and Rural Housing Services inched up to 24.1 percent, both new highs.
According to Zillow's break-even horizon analysis, in half of US Metros measured by the company, buying a home is a better financial decision than renting for buyers intending to stay in their home at least two year's. The analysis takes into account different asset streams associated with different situations, such as a homeowner's equity versus a renter's ability to invest money spent on a home purchase. Florida proved to have some of the shortest break-even time frames, with 3 of the top 4 metros.