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Many economists lately have been fretting that rising home prices, which have far outpaced wage increases, make homeownership unaffordable to too many Americans. Yet a recent report from the data analytics division of Black Knight says that housing is more affordable than long-term benchmarks.

Home price increases vary from one location to another, with only a handful of states seeing dramatic price increases. Affordability is also impacted by income levels and interest rates. Low interest rates currently make home purchases less burdensome.

The September Mortgage Monitor found that nationally 21.4 percent of the median income was required to purchase the median-priced home, compared to 24.2 percent from 1995 to 1999 and 26.2 percent from 2000 to 2003, just before the rapid increase in home values.

Home price increases, estimated at 6.07 percent by the most recent S&P CoreLogic Case-Shiller U.S. National Home Price Index, are anticipated to continue in 2018. Low interest rates contribute to affordability, but rising prices have offset the savings from low rates.

The Black Knight report looked at state-level data to analyze differences between various housing markets.

Only Hawaii, California, Oregon and the District have higher payment-to-income ratios now than their longer-term benchmarks.

If prices continue to rise and mortgage rates rise in 2018 as anticipated, affordability could be reduced further.

According to Black Knight’s report, most states will remain below long-term benchmarks for affordability even if home prices rise at the same pace next year. But if mortgage rates rise higher or home prices rise more, more states will see their affordability rate decline by the end of 2018.

For the full report, click here.

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