Re­gional mort­gage rates hit 7-year high

Cap­i­tal Re­gion wage stag­na­tion also de­ters po­ten­tial home­buy­ers

Albany Times Union - - BUSINESS - By Brian Near­ing

With home mort­gage rates climb­ing to a sev­enyear high, typ­i­cal homes in the Cap­i­tal Re­gion have be­come less and less af­ford­able this year, ac­cord­ing to a re­gional real es­tate agents group.

Cap­i­tal Re­gion As­so­ci­a­tion of Real­tors CEO Laura Burns said ris­ing in­ter­est rates, which make monthly mort­gage pay­ments more ex­pen­sive, and stag­nant wages are mak­ing it harder for po­ten­tial buy­ers to af­ford homes, par­tic­u­larly for less af­flu­ent buy­ers look­ing at mod­estly priced houses.

So far, these trends have not damp­ened a brisk real es­tate mar­ket of in­creas­ing sales and climb­ing home prices since the hous­ing mar­ket be­gan climb­ing out of re­ces­sion-driven dol­drums in 2012. How­ever, a key in­di­ca­tor in the re­gional real es­tate mar­ket called the “hous­ing af­ford­abil­ity in­dex,” which is tied to pre­vail­ing in­ter­est rates, has been steadily de­clin­ing this year af­ter steadily im­prov­ing since 2009, ac­cord­ing to GCAR fig­ures.

So far, that de­cline has not blunted home sales prices, said Burns. But the trend is trou­bling, she said, es­pe­cially if it con­tin­ues. “We will see what our Septem­ber num­bers tell us,” Burns said.

The in­di­ca­tor shows whether a fam­ily earn­ing me­dian house­hold in­come — mean­ing an in­come in the ex­act mid­dle of all house­hold in­comes for that area — has enough in­come to buy and mort­gage the me­dian-priced home.

An af­ford­abil­ity score of 100 means the me­dian house­hold has just enough money to af­ford that me­dian home, which in Au­gust cost about $224,700 for the Cap­i­tal Re­gion.

As in­ter­est rates rise, hous­ing af­ford­abil­ity scores tend to fall, as ris­ing monthly in­ter­est pay­ments price out some po­ten­tial buy­ers. Mort­gage rates have been steadily climb­ing since early 2016 and this week, a 30-year mort­gage hit nearly 5 per­cent, a level last seen in 2011.

Last year, the U.S. me­dian house­hold in­come was $60,366, ac­cord­ing to U.S. Cen­sus fig­ures. In the Cap­i­tal Re­gion, that fig­ure is $83,726 in Saratoga County, $66,204 in Al­bany County, $64,050 in Rens­se­laer County, and $62,514 in Sch­enec­tady County.

Hous­ing af­ford­abil­ity scores above 100 in­di­cate that the me­dian house­hold has more than enough pur­chas­ing power rel­a­tive to the me­dian

home price, while scores be­low 100 mean that house­hold lacks the re­sources to make that pur­chase.

Cap­i­tal Re­gion hous­ing af­ford­abil­ity scores first crossed 200 in 2012 and peaked in early 2016 at 220 — mean­ing the me­dian house­hold in­come was more than dou­ble what was needed to buy the me­dian-priced home, which at that time was about $180,000, ac­cord­ing to GCAR fig­ures.

The af­ford­abil­ity score zigzagged around 200 un­til late 2017 and has been de­clin­ing ever since, hit­ting 165 in Au­gust, which is ap­proach­ing lows last seen dur­ing the Great Re­ces­sion in 2009 and 2010.

Dur­ing the worst of the down­turn, the af­ford­abil­ity score moved as low as 120 for the re­gion.

Burns said that af­ford­abil­ity now ap­pears to be tak­ing a hit be­cause while over­all un­em­ploy­ment in the re­gion is low, wages have re­mained rel­a­tively stag­nant for many peo­ple, so as me­dian home prices have risen, those peo­ple have not been able to keep up.

Some of that may be due to “un­der­em­ploy­ment,” she said, in which peo­ple are work­ing in rel­a­tively low-pay­ing jobs.

While that may make un­em­ploy­ment num­bers drop, those house­holds lack suf­fi­cient pur­chas­ing power for ma­jor ex­pen­di­tures like homes.

But the af­ford­abil­ity is­sues don’t seem to be re­duc­ing de­mand for the re­gion’s most ex­pen­sive homes priced at $400,000 or more, where the sales mar­ket re­mains strong and grow­ing.

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