Rising Rates Cut Ability to Afford Homes

If you’re thinking of buying a home, those rising mortgage rates may have already cut into how much house you can afford.

According to the National Assn. of Realtors, higher rates were partly to blame for a drop-off in the typical American family’s ability to buy a median-priced home during the second quarter of 1999.

The group’s composite Housing Affordability Index fell 5.7 percentage points from the first quarter to 134.5 for the second quarter.

The index means that half the nation’s households had at least 134.5% of the income needed to buy a home at the second-quarter median existing-home price of $133,500. The index measures affordability factors for buyers making a 20% down payment.

A family who earns the U.S. median income of $46,492, for example, could afford a home costing $179,600.

“Essentially, a rise in family income was offset by a combination of higher mortgage rates and an increase in the median existing-home price,” said Fred Flick, vice president of economic research for the association.