Mortgage rates still low, but home affordability has declined for many

Published 12:32 pm Wednesday, December 1, 2021

Mortgage rates are still low, but creeping up. The median home price is up in Southwest Louisiana, but nothing compared to the national median list price, and government programs could help first-time homebuyers.

Mortgage rates have been historically low for quite some time. Some 15-year rates have been as low as two percent, higher for 30-year loans.

“Rates will vary depending on the program, down payment, credit score, number of years, and paid discount points,” said Jennifer Spees, Louisiana Mortgage Associates. “For someone with good credit and limited to zero discount points, you may see a rate of 2.5 percent to 3.5 percent depending on the term and type of loan.”

Rates have risen since the beginning of the year .5 to .75 percent, according to Spees. Once employment improves and inflation stabilizes, it is possible the feds will feel comfortable raising the federal funds rate, which dictates the prime rate and variable mortgage rates.

For the third quarter – and for 2021 as a whole – home affordability declined for many potential buyers across the United States. The national median hit $303,288, a 17.7 percent increase year over year, a 45.6 percent increase compared to 2017. The good news is, despite high demand and low inventory, Southwest Louisiana is not seeing these dramatic increases.

Housing demand increased across the United States. More people started working from home because of the pandemic. Space and floor plan needs changed. For the first time, some professionals could live anywhere, have the ideal home address and/or live in a rural community where real estate can be more affordable without regard to commuting times.

COVID also impacted material supply. In Southwest Louisiana, demand and supply of building materials and labor were further exasperated by hurricane damages to homes.

In Calcasieu Parish, the median home price is $180,065, up 1.4 percent since last year. Median household income in the parish is $51,246, according to the latest study from Porch.

Porch is a website that connects homeowners with home improvement contractors. Porch researched the information to find the least expensive places to live in the United States using parish/county data from Zillow and information from the Census Bureau. Only parishes/counties with at least 200,000 residents were considered.  The median household income for the United States is $65, 712.

The Southwest Louisiana Association of Realtors posted the median home price at $235, 000, up 3.1 percent from $242, 500 the previous year. In 2018, the median sales price was $213,200, according to Tonya Meche, 2021 President-Elect, Board of Directors of Southwest Louisiana Association of Realtors. The Southwest Louisiana Association of Realtors cities and towns include but are not limited to Lake Charles, Sulphur, Iowa, Westlake and Ragley.

“If a house is appropriately priced, it sells quickly,” said Amanda Cox, SRES, RENE, CRS, APR with Latter Blum.

She said because of high demand and low inventory – new houses are slow to be built here — some sellers of existing properties have established unrealistic expectations.

“While a few of my listings did receive multiple offers, sellers receiving an offer over the list price is not the norm,” she said, “not here.”

Comps (a list of similar properties in the neighborhood and what those properties sold for) and appraisals continue to be the driving factors behind pricing property. A dearth of appraisers because of relocation due to the hurricanes and other weather events, slows getting appraisals.

“Even if demand is higher, appraisal is governed chiefly by the value of the home,” Cox said.

The appraisal, in addition to the applicant’s credit score and other factors, determines the mortgage interest amount.

“I am encouraging buyers to make decisions,” Cox said. “I am encouraging sellers on the fence to get their house on the market, while buying power continues to be robust due to the low interest rates. Interest rates affect this power dramatically.”

Combining today’s low interest rates with new government programs could make home ownership a reality for first-time home buyers. The Downpayment Toward Equity Act will make it possible for qualified applicants to receive $25,000 in cash/grant to purchase a new home.

The First-Time Homeowner Act has been OK’d and it establishes a tax credit equivalent to ten percent of the purchase price of the home not to exceed $15,000.