SOURCE: Freddie Mac

Freddie Mac

December 19, 2013 11:30 ET

Diverging Homebuyer Affordability

December 2013 U.S. Economic and Housing Market Outlook

MCLEAN, VA--(Marketwired - Dec 19, 2013) - Freddie Mac (OTCQB: FMCC) released today its U.S. Economic and Housing Market Outlook for December showing that housing affordability is being challenged as we close out the year. An interactive affordability map showing the effects rising mortgage rates have on local markets is available, as well as a short preview video and the complete December 2013 U.S. Economic and Housing Market Outlook.

Outlook Highlights

  • At a 4.4 percent interest rate for a 30-year fixed that prevailed in the third quarter of 2013, over 70 percent of the country remained affordable, all of the North Central region remained affordable, while just 36 percent of the West remained affordable. 
  • At a 5 percent rate (and no change in prices/income) approximately 63 percent of the country would be affordable, at 6 percent mortgage rates 55 percent would be affordable, and at 7 percent mortgage rates only 35 percent of the country would be affordable.
  • Household net worth was up nearly $2 trillion in the third quarter of this year from the second quarter, and home mortgage debt rose 1 percent in the third quarter, a positive sign that the mortgage market continues to heal.
  • Existing homeowners' housing payment-to-income ratio has fallen to an average of 7.9 percent, its lowest level since 1980, a positive sign for sustainable homeownership.

Attributed to Frank Nothaft, Freddie Mac vice president and chief economist.

"While most housing markets still remain affordable, rising mortgage rates and rising house prices over the past six months are making it more challenging for the typical family to purchase a home without stretching beyond their means, especially in the Northeast and along the Pacific Coast. Like most, we expect mortgage rates to rise over the coming year, so it's critical we start to see more job gains and income growth in the coming year. This will help to keep payment-to-income ratios in balance -- an important factor not only for first-time buyers but for sustaining homeownership levels among existing owners."

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today Freddie Mac is making home possible for one in four home borrowers and is one of the largest sources of financing for multifamily housing. For more information please visit Twitter: @FreddieMac