Fortunately, the nation’s low-interest-rate environment has spurred significant growth in affordability as Black Knight claims that America’s national payment-to-income ratio declined during the month of September.
According to the company’s Mortgage Monitor report, it only takes 20.7% of the national median income to make monthly principal and interest payments on an average-priced home.
This marks the second-lowest reading within the last 20 months and boosts the nation’s overall housing affordability to a near three-year high.
“Back in November 2018, we were reporting on home affordability hitting a nine-year low,” said Ben Graboske, Black Knight’s president of data & analytics. “Interest rates were nearing 5%, pushing the share of national median income required to make the P&I payments on the purchase of the average-priced home to 23.7%. While still below long-term averages, that made housing the least affordable it had been since 2009, spurring a noticeable and extended slowdown in home price growth.”
Graboske says in the time since, rates, which came in at 3.64% last week, have tumbled and the affordability outlook has improved significantly.
“The payment-to-income ratio is now 20.7%, which is the second-lowest it has been in 20 months, behind only August of this year, and about 4.5% below the long-term, pre-crisis norm,” Graboske said. “To help quantify the boost this has given to homebuyers, consider that today’s prevailing 30-year rate has cut the monthly P&I payment to purchase the average-priced home by 10% – about $124 per month – from November.”
Put another way, Graboske says the decline in rates since November has been enough to boost consumer buying power by $46,000 while keeping monthly P&I payments relatively the same.