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Housing Still Affordable, Despite Pricing Upticks

credit-cardThough credit availability is no worse than mid-2016, it’s no better either. According to the April 2017 Chartbook released by the Urban Institute’s Housing Finance Policy Center on Monday, the credit availability index remained unchanged between Q3 and Q4 2016. Thankfully, housing is still pretty affordable, at least according to historic standards, the report stated.

For January 2017, the median sales price was $234,000, while the max affordable price was $305,861—down slightly over the last quarter of 2016.

“Even if interest rates rise to 5.5 percent, affordability would still be at the long-term historical average.”

If a 5.5 percent rate were, indeed, reached, the max affordable price would be just under $275K—still lower than Q1’s median sales price.

But price isn’t the only thing that could impede a buyers’ ability to purchase a home. Ever-tightening credit access could pose a hurdle, too, and according to the Chartbook, FICO scores on new originations have jumped 32 points in the last 10 years. The lower 10th percentile of buyers this quarter averaged a score of 647. Before the housing crisis, the average was in the low-600 range.

On GSE loans, the average first-time buyer had a FICO score of 739.7, while repeat buyers averaged 753.8. For FHA purchases, first-time and repeat buyers averaged 679.3 and 686.1, respectively.

First-time homebuyers made up nearly 46 percent of all GSE purchase loans in January, an uptick from the end of 2016. On FHA loans, first-time buyers accounted for 83 percent of loans—a drop from its May 2016 peak of 83 percent.

Over-the-year home price growth is up, but appreciation has slowed, growing 7 percent since early 2016. Six metros have already reached their pre-crisis peaks regarding home prices. These markets include New York, Atlanta, Houston, Dallas, Seattle, and Denver.

Other highlights of the Chartbook included:

  • Refinances dropped from 36 to 34 percent for FHA, 55 to 51 percent for Freddie Mac, and 58 to 53 percent for Fannie Mae.
  • Properties in serious delinquency saw an uptick from 1.41 to 1.6 in Q4 2016—the highest level since mid-2013.
  • Freddie Mac executed its biggest risk-sharing deal ever with a $60.7 billion transaction.
  • ARMs declined once again to just 2.4 percent of all mortgage originations, while 15-year fixed-rate mortgages increased slightly.

To view the full report, visit Urban.org.

About Author: Aly J. Yale

Aly J. Yale is a longtime writer and editor from Texas. Her resume boasts positions with The Dallas Morning News, NBC, PBS, and various other regional and national publications. She has also worked with both the Five Star Institute and REO Red Book, as well as various other mortgage industry clients on content strategy, blogging, marketing, and more.
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