The national mortgage payment-to-income ratio sits at 21 percent, according to Black Knight’s January 2015 Mortgage Monitor Report released today. The report notes that despite two years of home price increases at the national level, affordability is better now than it was in the years prior to the housing bubble. This is due primarily to the current low interest rate environment. The payment-to-income ratio now stands above the 26 percent average seen during the 2000 to 2002 period just prior to a drastic increase in home prices.
Washington D.C., Hawaii, and Alaska are all less affordable areas now than in the pre-bubble years. In Washington D.C., the current payment-to-income ratio is 40 percent, which is lower than the 62 percent ratio shown at the peak of the housing bubble. Michigan, Texas, and Florida currently have ratios under the national average, with Michigan having a low ratio at 16.9 percent. The payment-to-income ratio in California is 32.5 percent, second only to Washington D.C.
All top 31 banks in the U.S. passed the first round of the Federal Reserve’s “stress test,” according to data released by the Fed. Banks were tested under a hypothetical scenario which featured a deep recession with unemployment peaking at 10 percent, a decline in home prices of 25 percent, a stock market drop of nearly 60 percent, and projected loan losses totaling $340 million for all the banks combined. Results show the combined banks’ aggregate tier 1 common capital ratio would fall to 8.2 percent, which is above the Fed requirement of 5 percent.