So what exactly are your american residential mortgage rates these days?
Here in Canada, the typical home mortgage is between 1.99% and 2.99%.
Your US rates are confusing, because unlike here in Canada (where we do
have a single advertised rate) you have a bunch of other fees and
"points" tacked on which makes it less clear what your actual "all-in"
rate is, and also makes it hard to compare mortgages from bank to bank.
But yes, just recently some financial instututions here in Canada began
offering 1.99% mortgages (3 year fixed term I think). That's the entire
rate - no extra junk thrown in on top. If you can pay 20% down, then no
mortgage insurance required (by law). Minimum down payment is 5% (by
law). Mortgage insurance will cost you from 3.3% of the mortgage amount
(if your downpayment is the minimum 5%) to 1.25% (if the downpayment is
just under 20%). Which means on a $200k house, with downpayment of 5%
($10k) the total insurance cost (regardless of mortgage term) is about
$6k, and that falls to under $3k with a downpayment of 20% ($40k).
Half of Americans cant afford their house
June 4, 2014
As the housing market slowly recovers, a majority of homeowners and
renters are finding it hard to meet rising rents and mortgage payments,
new research finds.
Over half of Americans (52%) have had to make at least one major
sacrifice in order to cover their rent or mortgage over the last three
years, according to the How Housing Matters Survey, which was
commissioned by the nonprofit John D. and Catherine T. MacArthur
Foundation and carried out by Hart Research Associates. These sacrifices
include getting a second job, deferring saving for retirement, cutting
back on health care, running up credit card debt, or even moving to a
less safe neighborhood or one with worse schools.
Affordability issues are real and a major hurdle, says Lawrence Yun,
chief economist at the National Association of Realtors, an industry
group. Home prices have increased 20% over the past two years while
wages have barely gone up, he says. Only by adding more new supply, via
housing starts, can home prices be tamed, Yun adds. In fact,
construction of housing units has averaged around 1.5 million a year for
the past five decades, he says, but its likely to be less than 1
million in 2014.
Whats more, at least 15% of American homeowners (or residents of 78
counties across the country) were living in housing markets where the
monthly mortgage payment on a median-priced home requires more than 30%
of the monthly median household income long considered the maximum for
rent/mortgage repayments. Housing costs above that threshold are
unaffordable by historic standards, says Daren Blomquist, vice
president at real estate data firm RealtyTrac. In New York
county/Manhattan, mortgage payments represent 77% of the median income
and in San Francisco County represents 70%.
Also see: Why the price of a new home is rising
Although mortgage rates are still quite low, down payments, poor credit
and tighter lending standards remain three of the biggest hurdles for
buying a home, especially among young people, Blomquist says. The slow
jobs recovery for young adults has made it harder for them to save and
to get a mortgage. Some 84% of young people are delaying major life
decisions due to the poor economy, according to a 2013 survey by
Generation Opportunity, a nonprofit think tank based in Arlington, Va.
Some people also appear to be cooling on one facet of the American
dream. About 43% of respondents in the How Housing Matters Survey say
owning a home is no longer an excellent long-term investment and one of
the best ways for people to build wealth and assets, and over half say
buying a home has become less appealing. Although 70% of renters aspire
to own a home, some 58% believe that renters can be just as successful
as owners at achieving the American dream.
Also see: Why your rent is so damn high
But theyre still suffering the aftershocks of the property bust,
experts say. In the years after the recession of 2008, more than 7.5
million homeowners lost their home to foreclosure or short sale and
about 9 million more homeowners are still underwater and owe more than
their property is worth, Blomquist says. If one looks at the last seven
years as a predictor of housing market behavior in the future, it
certainly should give one pause about whether buying a home is a good
investment or not, he adds.
Thats not necessarily a bad thing, says Stuart Gabriel, director of
UCLAs Richard S. Ziman Center for Real Estate. From a policy
perspective, we overshot in prescribing homeownership too often and to
those who would have benefited more from other housing solutions, he
says. Homeownership rates hit 64.8% in April, the lowest since 64.7% in
the second quarter of 1995, according to the Census Bureau. Its wise
to approach homeownership with more skepticism and more trepidation, he
The good news: Rising prices have lifted millions of homeowners out of
negative equity. Since the lowest point in the housing market crash,
rising prices have led to an additional $4 trillion in housing equity,
going to existing homeowners, smart investors and those who can afford
to buy, Yun says. Home prices, including distressed sales, increased
10.5% in April 2014 year-over-year, according to the latest survey from
mortgage-data firm CoreLogic, representing the 26th consecutive month of
annual increases in home prices.