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The OCC or Office of the Comptroller of the Currency warned that lending standards have fallen for 4 straight years particularly for consumer and real estate related financing including mortgages in its latest annual report on the subject.

That said higher rates do have a material effect on affordability and the recent 1% or so gain in mortgage rates have reduced affordability based on the average price by a little over 11%. Another way to look at affordability is to examine the average income required to buy the average house assuming a 20% down payment and top shelf credit. Currently to afford the $361,000 average new home price requires an income of $64,800, in contrast this ratio peaked at the end of the previous housing boom in 2008 at $52,800 and is well above the mean of $45,760. Once again, I’ll note that valuation is the single most important determining factor with respect to investment success.



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