Busting the Myth About a Housing Affordability Crisis
Busting the Myth About a Housing Affordability Crisis
![]() It seems you can’t find a headline with the term “housing affordability” without the word “crisis” attached to it. That’s because some only consider the fact that residential real estate prices have continued to appreciate. However, we must realize it’s not just the price of a home that matters, but the price relative to a purchaser’s buying power. 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 3.5% over the last year. Let’s look at three different reports issued recently that reveal how homes are very affordable in comparison to historic numbers, and how they have become even more affordable over the past several months. 1. National Association of Realtors’ (NAR) Housing Affordability Index:Here is a graph showing the index going all the way back to 1990. The higher the column, the more affordable homes are: NAR’s report on the index also shows that the percentage of a family’s income needed for a mortgage payment (16.5%) is dramatically lower than last year and is well below the historic norm of 21.2%. 2. Black Knight’s Mortgage Monitor:This report reveals that as a result of falling interest rates and slowing home price appreciation, affordability is the best it has been in 18 months. Black Knight Data & Analytics President Ben Graboske explains:
3. First American’s Real House Price Index:While affordability has increased recently, Mark Fleming, First American’s Chief Economist explains:
Fleming goes on to say that the gains in affordability are about mortgage rates and the increase in family incomes:
Bottom LineIf you’ve put off the purchase of a first home or a move-up home because of affordability concerns, you should take another look at your ability to purchase in today’s market. You may be pleasantly surprised! |
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