WASHINGTON — The rise and fall in mortgage rates directly affects home affordability, and rates remain low enough right now that, in Washington, along with relatively high incomes, affordability is still fairly high.
But that could change.
In the Washington metro, a potential homebuyer with the region’s median household income could spend 30 percent of household income, on a tight budget, on a mortgage and afford a $614,000 home, according to Zillow.
If 30-year rates rose to 6 percent, that price point would reset to $527,000.
“Six percent seems aggressive, particularly in light of everything that has been moving in the financial markets and the political world,” Zillow senior economist Aaron Terrazas told WTOP.
“I think a year from now, assuming the economy stays out of recession, a mortgage rate of 5.3 to 5.5 percent is reasonable.”
Zillow said many homebuyers in 2019 will need to reset their price points, and maybe make concessions about where they are willing to live or how much space they want.
But in the Washington market, despite the high prices, the squeeze on affordability because of higher rates won’t be nearly as pronounced as it will be in frothy West Coast cities, such as Los Angeles.
“Even at current mortgage rates, only 17 percent, one in five homes on the market is affordable for the median household income earner,” Terrazas said.
“In Washington about three-quarters of the homes are affordable to the median household income. It is pretty shocking how unaffordable those big west coast cities have become.”