Homes Are More Affordable Today, Not Less Affordable

By
Real Estate Agent with REMAX Realty Group Lic. # SL3154233

There’s a current narrative that owning a home today is less affordable than it has been in the past. The reason some are making this claim is because house prices have substantially increased over the last several years.

It’s not, however, just the price of a home that matters.

Homes, in most cases, are purchased with a mortgage. The current mortgage rate is a major component of the affordability equation. Mortgage rates have fallen by over a full percentage point since December 2018. Another major piece of the affordability equation is a buyer’s income. The median family income has risen by approximately 3% over the last year.

The National Association of Realtors (NAR) releases a monthly Housing Affordability Index. The latest index shows that home affordability is better today than at almost any point over the last 30 years. The index determines how affordable homes are based on the following:

“A Home Affordability Index 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 of 120 signifies that a family earning the median income has 20 percent more than the level of income needed pay the mortgage on a median-priced home, assuming a 20 percent down payment so that the monthly payment and interest will not exceed 25 percent of this level of income (qualifying income).”

The higher the index, therefore, the more affordable homes are. Here is a graph showing the index since 1990:

buying a house in 2020

 

Obviously, affordability was better during the housing crash when distressed properties – foreclosures and short sales – sold at major discounts (2009-2015). Outside of that period, however, homes are more affordable today than any other year since 1990, except for 2016.

The report on the index also includes a section that calculates the mortgage payment on a median priced home as a percentage of the median national income. Historically, that percentage is just above 21%. Here are the percentages since June of 2018:

buying a house with remax realty

Again, we can see that affordability is much better today than the historical average and has been getting better over the last year and a half.

Bottom Line

Whether you’re thinking about buying your first home or moving up to the home of your dreams, don’t let the false narrative about affordability prevent you from moving forward. From an affordability standpoint, this is one of the best times to buy in the last 30 years. Call Realtor Abby Stiller with Remax Realty Group for a free consultation at 239-284-8637

 

information provided by KCM

Posted by

 

Abby Stiller 

Realtor® Lic. #3154233    

12 Years of Experience

RE/MAX Realty Group    Cape Coral Fort Myers Naples  Realtor Cape Coral      

 

I help Home buyers find their dream home & Homeowners sell for more. Thinking of buying or selling? Call/Text me: 239-284-8637   Your Honest & Dedicated Realtor!

or visit: www.TeamStiller.com

 

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