Wednesday, June 10, 2020 / by Austin Goodale
Crisis? What Crisis?
It’s not what you think -- you almost 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. But it’s not just the price of a home that matters, but the price relative to a purchaser’s buying power.
Most people buy homes 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. Combined, these reveal that homes are very affordable in comparison to historic numbers, and how they have become even more affordable over the past several months.
For instance, the National Association of Realtors’ (NAR) Housing Affordability Index, going back to 1990, shows that homes are more affordable today than at any time from 1990 to 2008. The NAR also reports 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%.
Another source, the Black Knight’s Mortgage Monitor, reports that as a result of falling interest rates and slowing home price appreciation, affordability is the best it has been in 18 months -- despite the average home price rising by more than $12K since November, today’s lower fixed interest rates have worked out to a $108/mo. lower monthly payment – and lower interest rates have also increased the buying power for prospective homebuyers looking to purchase the average-priced home, by the equivalent of 15%. Even better, the First American’s Real House Price Index Chief Economist, Mark Fleming, explains: “If the 30-year, fixed-rate mortgage declines just a fraction more, consumer house-buying power would reach its highest level in almost 20 years.” And THAT’s good news! So if you’re putting 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!
And if you, or anyone you know, is thinking of making a move soon or in the near future, call or text us at (480) 734-8781 or (602) 799-7099 with their name and number, and we'll make sure to help them achieve their selling or buying goals. Even better, when you make a real estate referral to us, it helps us support the House Of Refuge, in Mesa, which provides transitional housing and job services that help homeless families who need a bit of help -- your referrals help us fund this very worthy cause, and make a brighter future for less fortunate families in our community. Please join us in this effort!
We truly appreciate your friendship, your referrals, and your business! We wish good health to you and yours!
Be happy and stay well!
Austin & Lynn