Home Prices & Mortgage Interest Rates Declines Result to Dramatic Housing Affordability

The combined decline in home prices and mortgage interest rates gives way to the dramatic improvement in housing affordability, this according to Fiserv Case-Shiller, a leading global technology provider serving the financial services industry.

“Housing affordability has improved dramatically because of declines in both prices and mortgage interest rates,” David Stiff, chief economist at Fiserv, said in a statement.

Based on the national Fiserv Case-Shiller home price indexes, single-family home prices declined by 5.9% in 2011 second quarter compared to a year ago.

For its part, the National Association of Realtors (NAR) reported that the median existing single-family home price was $164,100 in November, a decline by 4% from a year ago.

In terms of mortgage interest rate, Stiff said the monthly mortgage payment for a median-priced single-family home is now $700, compared to $1,140 in 2006, a decrease by close to 40%.

Although homes are becoming affordable, Stiff said housing demands remain low “with existing home sales back to 1998 levels, averaging 4.3 million units per year since June.”

Many Americans still have not taken advantage of the low home prices due to the stricter mortgage lending standards, Stiff said.

Stiff’s sentiment on the stricter mortgage lending standards was echoed by NAR President Moe Veissi. He said, “With consumer price inflation rising by more than 3 percent this year, consumers are looking to lock-in steady payments by taking out long-term fixed-rate mortgages.”

“However, the problem remains that some financially qualified families who are willing to stay well within their means are being denied the opportunity to buy in today’s market by the overly restrictive mortgage underwriting situation,” Veissi added.

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