Posted by: Josh Lehner | July 18, 2013

Housing Wrap-Up

This week’s housing posts have generated quite a bit of feedback and questions. I have modified the original posts with these two addendums addenda but am also highlighting them here for those interested.

First, based on an inquiry, the following provides an estimate on how households within the Portland MSA have been affected by the interest rate increases. I am using the latest 5 Year ACS data for the Oregon portion of the MSA which estimates there are approximately 698,400 households in the region. Applying the same methodology as used in the affordability post (Part 2) and using the 28% of income threshold, the graph below shows what percentage of these households can afford a home priced at different levels. The light blue lines and percentages to the right indicate what share of households could afford a home when interest rates were at 3.35% at the end of 2012. Taking into account that interest rates today are averaging closer to 4.5%, the dark blue lines illustrate what share of the region’s households can afford homes today.

AffordabilityChange

The rise in interest rates alone does impact affordability. An example: At lower interest rates 63% of the region’s households could afford a house priced at $200,000, while the rise in interest rates seen in recent months means today only about 59% of households could afford the same $200,000 home. In actual numbers this translates into nearly 29,000 households being priced out. At the $300,000 price level it represents a decline of over 34,000 households. While obviously not all household are looking to move or buy or could even qualify for a mortgage these days, it does represent a decrease in potential demand for homeownership due to just interest rate changes alone.

Second, the actual breakdown of employment by sector for those included in the housing and related industries post (Part 3) was omitted and I apologize for this. The following table has been inserted into the original post. Actual construction employment accounted for 51% of the overall sector’s employment in 2012.

HousingIndustries2012

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