The Ultimate Truth about Housing Affordability
There have been many headlines decrying an “affordability crisis” in the residential real estate market. While it is true that buying a home is less affordable than it had been over the last ten years, we need to understand why and what that means.
On a monthly basis, the National Association of Realtors (NAR), produces a Housing Affordability Index. According to NAR, the index…
“…measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels based on the most recent price and income data.”
Their methodology states:
“To interpret the indices, a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment.”
So, the higher the index, the more affordable it is to purchase a home. Here is a graph of the index going back to 1990:
It is true that the index is lower today than any year from 2009 to 2017. However, we must realize the main reason homes were more affordable. That period of time immediately followed a housing crash and there were large numbers of distressed properties (foreclosures and short sales). Those properties were sold at large discounts.
Today, the index is higher than any year from 1990 to 2008. Based on historic home affordability data, that means homes are more affordable right now than any other time besides the time following the housing crisis.
With mortgage rates remaining low and wages finally increasing, we can see that it is MORE AFFORDABLE to purchase a home today than it was last year!
Bottom Line
With wages increasing, price appreciation moderating, and mortgage rates remaining near all-time lows, purchasing a home is a great move based on historic affordability numbers.
To view original article, visit Keeping Current Matters.
Today’s Housing Inventory Is a Sweet Spot for Sellers
Buyers have fewer choices now than they did in more normal years, and that’s continuing to impact statistics in the housing market.
Evaluating Your Wants and Needs as a Homebuyer Matters More Today
So, if you’re looking to buy a home, take some time to consider what’s truly essential for you in your next house.
Where Will You Go If You Sell? Newly Built Homes Might Be the Answer.
New home construction is up and is becoming an increasingly significant part of the housing inventory.
Why Homeownership Wins in the Long Run
It’s important to think about the long-term benefits of homeownership when deciding whether or not to buy a home.
The True Cost of Selling Your House on Your Own
When it comes to selling your most valuable asset, consider the invaluable support that a real estate agent can provide.
What Homebuyers Need To Know About Credit Scores
Your credit score is one of the most important factors lenders consider when you apply for a mortgage.