801-205-3500 or 801-205-1600 Gales@UtahRealty.us

The Ultimate Truth about Housing Affordability

Courtesy of Marty Gale Utah Realty 

The Ultimate Truth about Housing Affordability | MyKCM

There have been many headlines decrying an “affordability crisis” in the residential real estate market. While it is true that buying a home is less affordable than it had been over the last ten years, we need to understand why and what that means.

On a monthly basis, the National Association of Realtors (NAR), produces a Housing Affordability Index. According to NAR, the index…

“…measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels based on the most recent price and income data.”

Their methodology states:

“To interpret the indices, a 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 above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment.”

So, the higher the index, the more affordable it is to purchase a home. Here is a graph of the index going back to 1990:

The Ultimate Truth about Housing Affordability | MyKCM

It is true that the index is lower today than any year from 2009 to 2017. However, we must realize the main reason homes were more affordable. That period of time immediately followed a housing crash and there were large numbers of distressed properties (foreclosures and short sales). Those properties were sold at large discounts.

Today, the index is higher than any year from 1990 to 2008. Based on historic home affordability data, that means homes are more affordable right now than any other time besides the time following the housing crisis.

With mortgage rates remaining low and wages finally increasing, we can see that it is MORE AFFORDABLE to purchase a home today than it was last year!

Bottom Line

With wages increasing, price appreciation moderating, and mortgage rates remaining near all-time lows, purchasing a home is a great move based on historic affordability numbers.

Three Benefits of Growing Equity in Your Home

Three Benefits of Growing Equity in Your Home

The Benefits of Growing Equity in Your Home Over the last couple of years, we’ve heard quite a bit about rising home prices. Today, expert projections still forecast continued growth, just at a slower pace. One of the often-overlooked benefits of rising home prices is...

American Confidence in Housing at an All-Time High

American Confidence in Housing at an All-Time High

  Fannie Mae just released the July edition of their Home Purchase Sentiment Index (HPSI). The HPSI takes information regarding consumers’ confidence in the real estate market from Fannie Mae’s National Housing Survey and condenses it into a single number. Therefore,...

How to Increase Your Equity Over The Next 5 Years

How to Increase Your Equity Over The Next 5 Years

How to Increase Your Equity Over the Next 5 Years Many of the questions currently surrounding the real estate industry focus on home prices and where they are heading. The most recent Home Price Expectation Survey (HPES) helps target these projected answers. Here are...

What Experts are Saying About the Current Housing Market

What Experts are Saying About the Current Housing Market

What Experts are Saying About the Current Housing Market We’re halfway through the year, and with a decline in interest rates as well as home price and wage appreciation, many are wondering what the experts predict for the second half of 2019. Here’s what some have to...

Salt Lake City Median House Prices

Salt Lake City Median House Prices

Wasatch Front median home prices bottomed in 2011, years after The Great Recession ended. Since then, home prices (all housing types) have been on the rise. The median price of Wasatch Front homes sold in the first quarter of this year was $308,000, 75 percent higher...

The Cost of Waiting: Interest Rates Edition

The Cost of Waiting: Interest Rates Edition

Some Highlights: Interest rates are projected to increase steadily heading into 2020. The higher your interest rate, the more money you will end up paying for your home and the higher your monthly payment will be. Rates are still low right now – don’t wait until they...

Pin It on Pinterest

Share This

Share This

Share this post with your friends!