Feb 10 2019 37430 1

Dated: 02/10/2019

Views: 264

How to Get a Better Perspective on Affordability | Simplifying The Market

How to Get a Better Perspective on Affordability

   Buying Myths, First Time Home Buyers, For Buyers, For Sellers, Move-Up Buyers, Pricing

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:

How to Get a Better Perspective on Affordability | Simplifying The Market

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.

Bottom Line

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.



You might also enjoy reading...

Blog author image

Team H and L Miami

Team H&L Miami @ Real Estate Empire Group is a fast growing boutique Real Estate firm established in 2001. It began to revolutionize property sales as well as marketing through brokers, agents, and an....

Want to Advertise on this Site?

Latest Blog Posts

Feb 22 2019 37430 1

4 Interior Design Styles to Inspire Your Next Home by Henry & Laly Sanz 02/18/2019 Do you ever look at pictures of dream homes online and wonder what yours is missing? The answer

Read More

Feb 21 2019 37430 1

FREE BUYING/SELLING GUIDES  3 Reasons Why We Are Not Heading Toward Another Housing Crash  Thursday February 21st, 2019  First Time Home Buyers,;

Read More

Feb 20 2019 37430 1

Real Estate with  TEAM H&L MIAMI @ REAL ESTATE EMPIRE HOME VIDEOS LANGUAGE  FREE BUYING/SELLING GUIDES  Why A Normal Market is

Read More

Feb 18 2019 37430 1

Millionaire To Millennials: Don’t Get Stuck Renting A Home… Buy One!  Monday February 18th, 2019  First Time Home Buyers, For Buyers, Millennials, Move-Up

Read More