Sticker Shock
The National Association of Realtors’ Housing Affordability Index, fell 16 percent in the 12 months through February, the most recent month available.
Prices have climbed so fast in the last two years that buyers have sticker shock, said Lawrence Yun, chief economist for the National Association of Realtors. He projects that sales will decline 2 percent this year after predicting, at the start of the year, for a small increase over 2013.
“Housing is a victim of its own success,” Yun said. “It’s just that the fast price growth is not healthy.”
Interest rates on 30-year mortgages are still about half the 8.36 percent average since 1971, according to Freddie Mac’s data. Rates on 30-year loans peaked at 18.6 percent in 1981.
Housing affordability is still 25 percent above the average since back to 1986, based on the trade group’s composite index, which measures housing costs, household income and interest rates.
Still Affordable
“When you talk about 3 to 4 percent interest rates, that’s still lower than what most of us are used to and as much as 12 percentage points lower than what we remember at the worst of the market,” Stefan Swanepoel, editor of Swanepoel Trends Report, a real estate industry journal based in San Juan Capistrano, California, said in a telephone interview.
Lenders have begun to loosen credit for home purchases as they seek to hold onto business that plunged as fewer homeowners refinanced. The average FICO score for conventional purchase mortgages was 755 in March, compared with a 763 average in 2012, according to Ellie Mae Inc., a mortgage-software provider.
It’s too early to say that the market’s recovery is faltering, said Paul Diggle, a housing economist with London- based Capital Economics Ltd. Bad weather accounted for slower sales in parts of the Northeast and Midwest, he said.