Interest Rate – A Solution and a Problem for Housing Affordability
Housing affordability remains a challenge for many potential homebuyers in 2016, despite favorable lending environment in recent years. According to the latest housing affordability index (HAI) reported by the California Association of REALTORS® (C.A.R), the percentage of homebuyers who could afford to purchase a median-priced home in California in the second quarter of 2016 fell to 31 percent from the 34 percent recorded in the first quarter of 2016, and was up from 30 percent in second quarter of 2015. This was the 13th consecutive quarter that the index has been below 40 percent and was near the mid-2008 low level of 29 percent.
At the state level, the recent quarterly HAI is only slightly below the long-run average of 32 percent, and is nowhere near the historic low of 11 percent
recorded in the second and third quarters of 2007. Keep in mind, however, that interest rates differ considerably between 2007 and 2016.