Portland housing affordability and interest rates.

 Yes, interest rates for residential mortgages are nudging up.  We're seeing rates on FHA, conventional and  jumbo loans above three percent.  Don't get me wrong, a rate of 3.25% or so, is a GREAT rate.  Just not if all your friends got rates at 2.65%.  Most home owners either got a good rate when they bought, or refinanced during these several years of low rates, leaving rate increases to effect folks currently or planning on buying.  Here's a chart showing how rising interest rates can effect monthly payments, or buying power. 

As interest rates go up, buyers can afford less of a house payment.  This shrinks the number of buyers who can afford any particular house, thus decreasing competition on any given listing.  For the past few months, sellers have seen less competition on their listings. 

Due to be updated any day now, the quarterly affordability index was already on the move in June.  Affordability is calculated according to a formula from the National Association of REALTORS®. The formula assumes that the buyer has a 20% down payment and a 30 year fixed rate determined by Freddie Mac. In the month of June 2021, a family earning the median income ($96,909 in 2021, per HUD) can afford 103% of a monthly mortgage payment on a median priced home ($521,000 in June).  

You can see back in the Great Recession, 2007, affordability was quite low, with households not able to afford even 85% of the monthly mortgage. Then, coming out of the recession, in 2011-2012, affordability peaked.  

We do expect to see some wage growth, which may increase affordability.  Though wage growth will need to outpace the rise in interest rates and prices, to have any effect on affordability.  Stay tuned as I'll post the updated affordability index when it is released. 

If you have questions about the real estate market, especially your particular situation, call, text or email.  leslievjones@gmail.com 503-312-8038