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Economic Update – June, 2013

Home Buying Remains Affordable Despite Rising Rates

Mortgage interest rates increased for the fifth consecutive week ending June 6, according to Freddie Mac.

The 30-year fixed rate hit 3.91 percent, meaning, when compared to a month ago, an increase of $30 per month for every $100,000 of debt. The rising rates have prompted concerns about the impact on home affordability, however, a Goldman Sachs report indicates these concerns are premature.

Using National Association of Realtors data, the report says, “Even if mortgage rates continue to increase from here, the median home will still be affordable to the median borrower, based on the conventional 25 percent debt-to-income threshold.”

Mansions are Back

New single-family homes are getting larger, according to Census Bureau data.
The median size rose to 2,306 square feet in 2012, up 8 percent from 2009, marking the highest median square footage since 1973 when the Census Bureau began tracking square footage. Despite an average home buyer household of fewer than three people, 41 percent of new homes had four or more bedrooms, and 30 percent had at least three bathrooms.

Following the financial crisis, the average new home decreased in size by 6 percent over two years, prompting some industry experts to predict the Mansion trend to be over. However, home builders now say money or lack thereof influenced the move away from Mansions. Now that the economy is turning around, buyers are looking for bigger homes because they can afford to buy them again.

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Category: Economy
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