The majority of housing markets remain affordable to the average
family, but rising mortgage rates and rising housing prices are causing
more families to have to stretch financially, according to Freddie Mac’s
U.S. Economic and Housing Market Outlook for December.
“Rising mortgage rates and rising housing prices over the past six
months are making it more challenging for the typical family to purchase
a home without stretching beyond their means, especially in the
Northeast and along the Pacific Coast,” says Frank Nothaft, Freddie
Mac’s chief economist. “Like most, we expect mortgage rates to rise over
the coming year, so it's critical we start to see more job gains and
income growth in the coming year. This will help to keep
payment-to-income ratios in balance -- an important factor not only for
first-time buyers but for sustaining homeownership levels among existing
owners."
According to Freddie Mac’s report, more than 70 percent of the
nation’s housing stock remained affordable to the typical family in the
third quarter at a 4.4 percent interest rate for a 30-year fixed-rate
mortgage. However, that percentage decreases to about 63 percent at a 5
percent mortgage rate; 55 percent at a 6 percent interest rate; and 35
percent at a 7 percent interest rate.
Source: Freddie Mac
