Joe and Di are buying their first home in a Midwest town.  Before signing a buyer’s agreement with a realtor, Joe and Di got approved for a mortgage loan and were told they qualified for a 97% loan-to-value, first time homebuyers mortgage loan for up to $185,000.  Joe and Di were worried about being stuck in a house they couldn’t afford, so they took the time to look at their non-housing expenses compared to take home income.  Together, Joe and Di figured out: if they lost their jobs and had to take minimum wage jobs or live on unemployment for short periods, what could they afford?  The couple then found a home that checked off most of the feature boxes for them.  They bought the home for $170,000, with a mortgage amount of $164,900.  This purchase price was above their comfort zone, but it was well below the mortgage approved amount.

Photo by Tobias Bjørkli from Pexels

Joe and Di’s affordability concerns are common in the home purchase market today.  In June, mortgage rate optimism may have kept consumer confidence high, but the Fannie Mae home purchase sentiment index, at the second highest ever in May 2019, slipped ever so slightly in June, indicating concerns inching into the market.

Following chair of the Board of Governors of the Federal Reserve System, Jerome Powell’s semi-annual testimony to Congress,  it became clearer that instead of raising interest rates this year, as previously mentioned, the Federal Reserve may cut rates. 

The Results?  Borrowers may find great interest rates to buy those homes, but there may still be a home purchase slowdown, as the more affordable homes become more scarce.