Home Affordability Continues to Remain High

The release of recent housing market data could have many potential home buyers concerned as it appears that slight improvements in the real estate market have taken place. The biggest concern is the price of homes that are beginning to increase in some areas. Regardless of these numbers, home affordability continues to remain high. According to the recent S&P/Case Shiller Composite 20-City Index, home prices saw an increase of 2.3% in June from the month of May. The Case-Shiller National Index for the second quarter rose 6.9% above the first quarter and was 1.2% above the same time a year ago. The 20 City Index shows a 4.1% increase in home prices since December, 2011. It is important to remember that prices have not increased in all areas of the country as some locations are still struggling to see a rebound. However, any increase in home value is significant while also reassuring for homeowners who want to see equity back in their homes. Much of the increase in home prices can be attributed to lower housing inventory which is driving prices higher. Successful mortgage refinance programs are giving existing homeowners a reason to stay in their homes or wait until the market fully returns so that they can recoup their lost equity. At this time, many are already seeing a reverse of negative equity in the current market value of their homes. HARP is a very popular refinance program and is available for borrowers who have loans that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009. The minimum LTV for HARP is currently 80%, with lawmakers trying to pass legislation making it available to everyone regardless of LTV. The FHA streamline refinance with no cash out, another successful program, has reduced upfront and annual fees for borrowers with loans that were endorsed prior to June 1, 2009. Both programs do not require an appraisal and can put borrowers into lower rates or shorter term mortgages. Through these government efforts, housing has somewhat stabilized although not fully recovered. Home affordability of all new and existing homes for the second quarter was 73.8% as reported by the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI). This number is down from the first quarter when it reached a record high of 77.5%. Despite the lower percentage due to the increase in home prices, home affordability remains above a year ago which is good news for home buyers. Even though home prices have increased slightly, mortgage rates are still at historic lows and lower than last year, while personal income has increased slightly. Home affordability is calculated by using a combination of home prices, income and mortgage rates. For potential home buyers, the housing market is still within their reach. Every location is different in terms of home prices, income and even mortgage rates with some areas being extremely affordable. At this time, there is still a favorable real estate market for buyers as home affordability continues to remain high and attainable according to today's standards. FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders' rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard 0.7 to 1% point origination fee.