Thursday, June 23, 2022

Harvard Joint Center Annual Report Shows Metro Affordability Impacts of Increasing Mortgage Rates; I Show 20 Oregon Metro Impacts of 6% Loan Rate.

One of the infographics included in the just released Harvard Joint Center for Housing Studies State of the Nation's Housing 2022 report is a map that shows by metro area the income required to afford a medium priced home. 

The map uses a 3.5% down payment and some standard rate assumptions for mortgage interest, mortgage insurance, property insurance, property taxes and a 31% ratio of housing expense to income. 

Use of the 3.5% down payment is an improvement over other models that I’ve seen that use a 20% down payment which is not representative of the overall market. 

At the bottom of the map page the Harvard report helps users by listing their property tax , mortgage insurance, and property tax rate assumptions, so it is possible to replicate their calculations and modify them to see results with other assumptions. 

I did so and applied a change in interest rate to see what the impacts would be for the Oregon metro areas included in their report. (My calculations may vary slightly from the Harvard report because of the use of different rounding formulas). 

Building on the Harvard Report: My calculation of 20 Oregon metro area impacts of a boost in the mortgage rate to 6%.

I downloaded the data for 20 Oregon metropolitan [CBSA] areas and added three columns showing the increase in borrower income required if the mortgage rate went from the 4.98% rate used in the Harvard report to 6%.


The 1 page PDF HERE and embedded below shows the results.

The income required would go up by a uniform 8.3%, but the dollar increase varies from $ 17,020 to $6,326.

The highest Oregon metro median price home in Bend at $712,359 would require an income of $212,903, up $17,021. HUD has the 4 person median family income for Bend/Deschutes county at $97,700 for FY 2022.

The lowest Oregon metro median priced home in La Grande at $264,786 would require an income of $79,137, up $6,327. HUD has the 4 person median family income for Union county at $70,300 for FY 2022

Originally created and posted on the Oregon Housing Blog


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