Surprised again
My how low interest rates are for mortgages! We have watched over the last several months as interest rates languished below 4 percent. Usually, we check for the lowest rates on guaranteed loans at ihfa.org, the website of Idaho Housing and Finance Association. For quite awhile the rate has hovered around 3.75 percent for a 30-year fixed mortgage. Friday we checked and low and behold, the rate was 3.5 percent!
A historical review showed that this rate is indeed the lowest rate in the history of long-term financing. Thirty-year home loans first became prevalent in the 1950s. Even the average rate, considering all lenders, fell to 3.75 percent last week. The 15-year mortgage, a popular refinancing option, slipped to 2.97 percent. That's down from 3.04 percent last week.
We don't know how low rates can possibly go, but most of us would never have believed they would be as low as they are today. This low interest, combined with the low prices of real estate have made home ownership more affordable than at any other time. According to the housing affordability index an index of 100 means that a family with the median income as reported by the U.S. Bureau of the Census has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment.
For example, a composite HAI of 120.0 means a family earning the median family income has 120 percent of the income necessary to qualify for a conventional loan covering 80 percent of a median-priced existing single-family home. An increase in the HAI, then, shows that this family is even more able to afford the median priced home.
Eastern Washington University's Institute for Public Policy and Economic Analysis, with input from community leaders has created a website, released in April, that is a great resource. Kootenai County Indicators (http://www.kootenaicountyindicators.ewu.edu) reports the housing affordability index for Kootenai County has been in excess of 200 since November. That would mean that a household earning the median wage of $46,336 as reported by the 2010 U.S. Census, would have twice the income necessary to buy a median priced home. For Kootenai County last April, that median price was $147,000. This is well below the national median of $163,600.
Will housing prices go lower? In some parts of the country perhaps they will. Homes in the South continued to fall last quarter as did some areas reported by our own Multiple Listing Service. In parts of the U.S. and in our MLS, homes are actually showing appreciation. This, as in parts of Canada is showing that the Home Affordability Index is eroding as housing prices increase.
Of course these affordability factors mean that inventory is being absorbed more quickly and entry level homebuyers are facing competition and even bidding to win the home they desire. We actually reported 12.7 percent fewer residential listings, or about 500 less, at the end of April this year when compared to last April. With MLS data still not complete for May, we showed 290 closed residential transactions that month this year. By the end of April we reported a 7.8 percent increase in sales of homes in our MLS and it looks like May will continue the trend. More homes sold and fewer new listings means more competition and higher prices. Many buyers who are still on the fence might be well advised to take the leap.
Trust an expert... call a Realtor. Call your Realtor or visit www.cdarealtors.com to search properties on the Multiple Listing Service or to find a Realtor member who will represent your best interests.
Kim Cooper is a real estate broker and the spokesman for the Coeur d'Alene Association of Realtors. Kim and the association invite your feedback and input for this column. You may contact them by writing to the Coeur d'Alene Association of Realtors, 409 W. Neider, Coeur d'Alene, ID 83815 or by calling (208) 667-0664.