Mortgage rates dip below 6% for first time more than three years, but affordability challenges continue

Mortgage rates dip below 6% in Houston

Mortgage rates have dipped below 6% for first time more than three years, but affordability challenges continue.

HOUSTON - The rate for a 30-year mortgage fell to 5.98% in the last days of February, to the lowest level in more than three years. Every 1% drop in mortgage rates adds about 10% more purchase power for a would-be buyer. 

30-year mortage rates drop below 6%

What we know:

The current rates that have dropped a few "hundredths" of a point over the last week, don't change the actual economics very much. While it may provide a psychological boost for buyers, there are a lot of economics to consider.

The other part of the affordability equation is how much buyers have to spend, and the high-prices for homes, known as the "price-to-income" ratio. Ideally, a home purchase is three to five times the size of household income to be considered affordable. 

Applied to Houston, where HAR says the median home price is $337,200, and the median household income is just over $62,000, that price to income ratio is 5.4, stretching just beyond affordability.

Housing experts say that's the continuing challenge for middle and low-income households, because the inventory of affordable housing remains historically low. Higher incomes, even smaller rates, and a greater selection of homes will be the only thing that makes home-buying easier for more people.

What they're saying:

"Home prices have doubled, while incomes just simply haven't kept up. It goes back to the supply and demand," says Lance Thrailkill, of Print3d Technologies, which build 3D printed concrete homes, "We've consistently had 7.4 million affordable homes needed, and we're only building a little over a million homes per year. A lot of those aren't focused on affordable housing. They're at higher price points; over 90% of them."