Big Interest Rate Slide Helps Texas Housing Affordability, Says Real Estate Center.Business Editors & Real Estate/Education Writers COLLEGE STATION, Texas--(BUSINESS WIRE)--May 23, 2001 Rapidly falling mortgage interest rates provided a major boost to would-be would-be adj. Desiring, attempting, or professing to be: "Would-be home buyers will have a somewhat easier time getting loans" Wall Street Journal. homebuyers in the first three months of the year, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the latest Texas Housing Affordability Index (THAI). The THAI rose to 1.35 for first quarter 2001 from 1.24 the previous quarter. The index was 1.26 a year ago. "Total Texas households that can afford the median priced home rose from 60 percent last year to 62 percent in the recent period," says Dr. Jack C. Harris Harris, Scotland: see Lewis and Harris. , research economist with the Real Estate Center at Texas A&M University and developer of the index. A THAI value of 1.35 means that the median Texas household income is 35 percent higher than the minimum income needed to buy a median-priced home. Prices are based on current sales closed through the state's multiple listing services. Financing is assumed at the currently available interest rate on 30-year mortgage loans covering 80 percent of the home's value. "Fearing that the national economy was slipping into recession, the Federal Reserve Open Market Committee took aggressive action early in the year to lower short-term interest rates Short-term interest rates Interest rates on loan contracts-or debt instruments such as Treasury bills, bank certificates of deposit or commerical paper-having maturities of less than one year. Often called money market rates. ," Harris said. "Long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. mortgage interest rates responded by falling over one-half percentage point during the quarter and almost a full point over the past 12 months." The average mortgage rate in Texas during the first quarter was 7.12 percent compared to 8.05 at the beginning of 2000. Affordability also was improved by the usual seasonal dip in home prices. Nevertheless, prices were 7 percent higher than they were one year ago. This price rise compares to an estimated 4 percent increase in median household income The median household income is commonly used to provide data about geographic areas and divides households into two equal segments with the first half of households earning less than the median household income and the other half earning more. . First time Texas homebuyers also fared better in the first quarter. The First-time Homebuyer's Affordability Index (FTHAI) rose to 1.10 compared to 1.03 one year ago. "The recent FTHAI indicates that the median income of a renting household in Texas is 10 percent higher than needed to buy the median-priced starter home A starter home or starter house is a house that is usually the first which a person or family can afford to purchase, often using a combination of savings and mortgage financing. , based on financing with a loan covering 95 percent of value," Harris said. "In addition to lower interest rates, first time affordability was aided by the FHA's decision to lower the up-front premium on its popular mortgage insurance program." |
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