Lower Mortgage Rates and a New Initiative Favor Delaware Home Buyers

By Richard Barrington
Local Lender Columnist
Jun 6, 2008
Sussex County, Delaware, is coping with a problem that much of the country would envy: rising home prices. Despite a housing slump in boom-to-bust markets like Florida and California, home prices in Delaware remain solid. This is a mixed blessing, as it leaves Delaware with the issue of how to make housing affordable to middle-income residents.

Along with a recent drop in mortgage rates, a new Sussex county initiative could increase Delaware's supply of affordable housing.

Moderately Priced Housing for Sussex County

In Sussex County, which makes up the southern portion of Delaware, the median home price has recently risen to $260,000. In the face of all the talk about a housing slump in much of the rest of the country, this is not bad news. However, it has raised a concern that housing costs are moving beyond the means of middle-income earners.

The ranks of middle-income earners include such occupations as teachers, police officers, and nurses. If housing prices move beyond the means of these workers, they will be driven away from the area. That, in turn, would leave Sussex County with a shortage of employees for these essential occupations.

This concern led to the creation of a pilot program with a goal of creating 500 reasonably-priced housing units. A new move is underway to try to accelerate this program.

The approach targets people earning between $30,900 and $68,875 by creating houses priced at $225,000 or below. This gives people who are earning enough to finance a reasonably-sized mortgage a shot at affording a house in Sussex County.

Lower Mortgage Rates Increase Purchasing Power

More help to afford housing has come in the form of a significant drop in mortgage rates. Since last summer, thirty-year mortgage rates have dropped by a full percentage point -- with roughly a third of that drop occurring in January of 2008 alone.

Lower mortgage rates mean more purchasing power for home buyers. By reducing interest expense, a mortgage at a lower rate will allow the same monthly payment to finance a larger amount of mortgage principal. It is this principal that goes toward the purchase price of a home.

The recent drop in mortgage rates has driven them to within about half a percentage point of their all-time low. In other words, current mortgage rates are among the lowest in history. Couple these bargain rates with the Sussex County initiative to provide moderately-prices homes, and the cost of owning a home may be getting more affordable for some Delaware buyers. In turn, helping people buy within their means should help Sussex County avoid the kind of mortgage problems other markets have seen.

Sources:

• The Daily Times
• Freddie Mac

About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.