Homes Less Affordable As Prices Fall, Rates Rise, Zillow Says

July 7, 2008

Higher interest rates are balancing out lower home prices and making home ownership less affordable in many U.S. real estate markets, according to a study of about 25,000 mortgage offers to potential homebuyers conducted by Zillow.com.

MAKING SENSE OF THE STORY

• Monthly payments are 6 to 10 percent higher than they were two months ago in the 41 housing markets Zillow surveyed.  On average, monthly payments have climbed $131, or $1,572 annually, since April 1.

• The situation is worse in high-cost markets like California.  In Ventura, for example, the annualized cost of a 30-year fixed rate loan to buyers with credit scores of at least 680 is $2,640 more than it was just 60 days ago.  Without considering inflation, that increase alone costs a borrower an additional $79,200 more over the life of the loan.  The trend applies to most areas of the state.

• Californians also are suffering from the increasing cost of jumbo loans – those mortgages made on homes with loans of more than $417,000.  Despite rate cuts by the Federal Reserve, jumbo loan rates since June 2003 have increased by more than two percentage points; over the past nine months alone they have increased from about 7 percent to approximately 7.4 percent.  What’s more, the average spread between jumbo and conforming loans has jumped from 93 basis points to approximately 111 basis points.

source: Bloomberg.com
 

Posted in Lending, Real Estate, Things of Interest