Homes Are More Affordable Today
With prices of homes as they are these days, some may believe that owning a home in the present day is less affordable than in years past. Despite a pattern of rising prices, this isn’t completely true as it is not just the price that matters.
So many homes are purchased with a mortgage and the rate defines much of the affordability equation. Rates today are even lower than they were in 2018. The other portion of the equation is the homeowner’s income and per recent studies that has been reported to have risen roughly by 3% over the last year. Furthermore, the National Association of Realtors has recently shared in their Housing Affordability Index that home affordability is better today than it has been in for the last 30 years.
“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 index had indicated affordability being at its greatest from the years of 2009 to 2015 during the economic downturn where there were significant sales of distressed homes in the way of short sales or foreclosures. Today, most of these properties are a thing of the past and affordability still is better than the years leading up to the crash.
The same report also shows a mortgage payment on a median priced property as a percentage of the median national income. Historically this percentage lies at roughly 21%. Since June of 2018 this percentage has almost consistently fallen with it landing at around 15.3% towards the end of 2019.
In the end don’t assume that buying a home isn’t affordable in current times. It is important to take a look at the big picture and consider all aspects to see just how reasonable it is today.