In today’s fast-paced world where answers are just a Google search away, there are some who may question the benefits of hiring a real estate professional when selling a house. The reality is, the
How To Get A Better Perspective On Affordability
Headlines spotlight the fact that buying a home is less affordable today than it was at any other time in more than a decade. Those headlines are accurate.
Understandably, buying a home is more expensive now than immediately following one of the worst housing crashes in American history. Over the past decade, the market was flooded with distressed properties (foreclosures and short sales) selling at 10-50% discounts. There were so many that this lowered the prices of non-distressed homes in the same neighborhoods. As a result, mortgage rates were kept low to help the economy.
Prices have since recovered. Mortgage rates have increased as the economy has gained strength. This has impacted housing affordability. However, it’s necessary to give historical context to the subject of affordability.
Two weeks ago, CoreLogic reported on what they call the “typical mortgage payment”. As they explain:
“One way to measure the impact of inflation, mortgage rates and home prices on affordability over time is to use what we call the ‘typical mortgage payment.’ It’s a mortgage-rate-adjusted monthly payment based on each month’s U.S. median home sale price. It is calculated using Freddie Mac’s average rate on a 30-year fixed-rate mortgage with a 20 percent down payment…
The typical mortgage payment is a good proxy for affordability because it shows the monthly amount that a borrower would have to qualify for to get a mortgage to buy the median-priced U.S. home…
When adjusted for inflation, the typical mortgage payment puts homebuyers’ current costs in the proper historical context.”
Here is a graph showing the results of CoreLogic’s research:
As the graph indicates, the most recent calculation remained 28% below the all-time peak of $1,275 in June 2006. That’s because the average mortgage rate at that time was 6.68%. As seen in the graph, both today’s typical payment and CoreLogic’s projection for the end of the year are less than it was in January 2000.
Even though home prices are appreciating at a slower rate, home affordability will likely continue to slide. However, this does not mean that buying a house is an unattainable goal in most markets. It is still less expensive today than it was prior to the housing bubble and crash.
Click Here to check out all the available Homes on the Market Today!
Hi, I’m Adam Crocker and I've lived in the Pacific Northwest for over 25 years! I love meeting new people and helping them purchase or sell their existing home! I work very hard for all my clients, ....
Latest Blog Posts
In today’s economy, everyone seems to be searching for signs that a recovery is coming soon. Many experts agree that it may actually already be in motion or will be starting by the 3rd
Is a Recession Here? Yes. Does that Mean a Housing Crash? No.On Monday, June 8, 2020, the National Bureau of Economic Research (NBER) announced that the U.S. economy is officially in a.