Can I Afford A House in 2017

Mortgage and Lending NMLS #209419

Whether you are a first time home buyer or a a move up home buyer the 1st question you ask yourself is can I afford a house or more specifically can you afford that house.  When deciding to purchase a home it good to know how House prices are determined so you can make your best offer.  There are three factors in determining house prices when you ask yourself the question can I afford a given house.  These factors are Housing supply, housing demand and housing affordability.

What is the Current outlook at Housing Supply?

Housing supply measures how many months it would take to sell all the houses currently listed for sale, at the current pace of home sales. For example, if there are 600 homes currently listed for sale, and an average of 100 homes are selling each month, there would be a 6-month housing supply. This is means it would take 6-months to sell all the homes currently listed for sale.

A buyer’s market is anything more than 6 months. A seller’s market is anything less than 6 months.  In this case, sellers would have greater negotiating power, and buyers may have to bid higher than list price in order to compete with multiple offers.

Housing supply has been running below 6 months across the US since 2012.  This indicates a seller’s market.  In many parts of the country, buyers are competing with multiple offers… in some cases dozens of offers on the same house.  This tells us that house prices are poised to continue going up in the next several months.

What is the Current trend with Housing Demand?

Housing demand tends to slow down in the winter because most home sales occur during the spring and summer.  Even so, housing demand is expected to remain strong because the economy is doing well and people have jobs in most parts of the country.  The chart to the right illustrates how there are more jobs available today than at any point in the past 15 years as measured by the Job Openings and Labor Turnover Survey (JOLTS) report.

Housing Affordability or Can I afford a house at current prices?

The National Association of Realtors (NAR) publishes a "Housing Affordability Index".

This is a chart illustrating NAR’s Housing Affordability Index for First-time Homebuyers.  A value of 100 means that a first-time homebuyer family with the median income has exactly enough income to qualify for a mortgage on a starter-priced home, with a 10 percent down payment.  An index above 100 signifies that a family earning the median income has more than enough income to qualify for a mortgage loan on a starter-priced home, assuming a 10 percent down payment.

Today's index value of 113.0 means that a family earning the median family income has 113% of the income necessary to qualify for a conventional loan covering 90 percent of a starter-priced existing single-family home. This means that houses are still affordable for first-time buyers as they generally are making more than enough income to qualify for financing.  In fact, homes are more affordable today for first-time homebuyers than they have been at any point in the past three years.

For move-up homebuyers, the affordability index is currently in the 169 range.  This also means that homes are more affordable today for move-up homebuyers than they have been at any point in the past three years.

Keep in mind that housing affordability in your situation could be higher or lower depending on the amount of your down payment and the mortgage strategy you choose.

It can also be different depending on where you are in the country.  Since we lend nationwide We have prepared a National Home Affordability Cheat Sheet.  Just contact me and I'll be happy to send it to you.

Conclusion: we anticipate an increase in house prices over the next several months because housing supply is likely to remain low, housing demand is likely to remain strong, and houses will continue to remain affordable for most buyers. Contact us as soon as possible or start your qualification now to get a jump on the interest rate increases in the coming months as well as the price increases and we can answer your question of "Can I Afford A House?".

Comments (1)

Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Henry, what a great post, and lots of valuable information for buyers wondering if they can or should buy this year.

Feb 08, 2017 02:54 PM
Henry D

Thank you. There is a lot of confusing info out there and I hope this clears things up for buyers! 

Feb 08, 2017 03:08 PM