Important Distinction: Homes Are Less Affordable, Not Unaffordable

Important Distinction: Homes Are Less Affordable, Not Unaffordable

When you hear about the latest crisis in housing, it's hard not to jump on board with those who are heralding this as a disaster. But when we take time for context and look back over recent history of affordability trends- including data from before these most recent headlines were even released by economists at lender banks- then what do we see? Homes have never been more affordable!

Black Knight, a premier provider of data and analytics for the mortgage industry, just released their latest Monthly Mortgage Monitor which includes a new analysis of the affordability situation. Here’s what the report reveals:

“The monthly payment required to purchase the average priced home with a 20% down 30-year fixed rate mortgage increased by nearly 20% (+$210) over the first nine months of 2021, . . . It now requires 21.6% of the median household income to make the monthly mortgage payment on the average home purchase, the least affordable housing has been since 30-year rates rose to nearly 5% back in late 2018.”

In a recent report, Black Knight showed that homes are less affordable today than at any other time in the last three years. However they calculated earlier this year that it takes just 23% of median household income to make monthly mortgage payments on an average home purchase over 25+years ago!

The mortgage payments for today's home buyers are more affordable than they have been in generations. This is because of two factors: first, income has increased while interest rates remain low; secondly homes are often purchased with cash or other assets instead of relying on credit scores alone to qualify

“The typical median-priced home around the U.S. remains affordable to workers earning an average wage, despite prices that keep going through the roof. Super-low interests and rising pay continue to be the main reasons why.”

Bottom Line

It’s true that it may be more difficult to buy a home these days, but if you know what your goals are and have the right mindset then buying can actually end up being cheaper in some ways.

Post a Comment