Index confirms fewer Puerto Rican families can buy a home
Puerto Rico’s Affordable Housing Index, prepared by economic research firm Estudios Técnicos, revealed a year-over-year deterioration in family income due to inflation and the increase in housing prices is limiting local families from buying a dwelling.
The index dropped to 69% in March, representing a decrease of 31 percentage points when compared to the same month in 2020, the same month when the COVID-19 pandemic was declared worldwide.
This means that the typical Puerto Rican family has only 69% of the income necessary to get a mortgage loan, putting down a 20% down payment, said Leslie Adames, director of analysis and economic policy at Estudios Técnicos.
The Affordable Housing Index measures if a typical family that makes a 20% down payment toward the purchase of a home qualifies, based on median income, for a mortgage loan.
A value equal to 100% means that the family has the necessary income to qualify for a mortgage loan based on the prevailing average market prices. A value above this threshold assumes people have more than enough income to qualify for a mortgage loan, while values below this threshold reflect the opposite.
Adames explained that this Index stood at 61% in January 2011 and had been gradually improving, reaching a maximum value of 100% in March 2020.
“This improvement is attributed to the historically low interest rate levels that prevailed in the market during this period, as well as the correction in prices experienced by the real estate market,” said Adames.
“Without a doubt, the increase in the average price of homes and the deterioration in purchasing power due to inflation already affect the ability of people to buy homes,” said Adames.
“Figures released by the Office of the Commissioner of Financial Institutions (OCIF, in Spanish) show that total home sales contracted from 3,286 in the first quarter of 2021 to 2,776 in the first quarter of 2022, primarily attributable to an 18% contraction in sales of residential units. used housing,” added Adames.
Index reflects that the most recent figures published by OCIF as of March, considered an average sale price of $193,813, and a 30-year fixed interest rate of 4.17% for March, he said.
“The panorama could get complicated in the next year if the upward trend in the interest rates of mortgage loans with 30-year fixed rates continues,” said Adames.
“This rate has already exceeded 6% and will be an additional factor that will add pressure on the affordability of housing in the local market and, consequently, on mortgage originations and home sales,” said Adames.
