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Housing Affordability Crisis Myth: Debunked

Thursday, August 22, 2019   /   by Michelle Ramos

Housing Affordability Crisis Myth: Debunked


We've been reading a lot of comments and questions about housing affordability lately that we decided to address what most people find confusing about this particular topic. If you're one of the many people in the gray zone as to whether or not to believe the thing you see and hear about housing affordability crisis, then you better read this.

1. National Association of Realtors’ (NAR) Housing Affordability Index: Here is a graph showing the index going all the way back to 1990. The higher the column, the more affordable homes are:

We can see that homes are less affordable today (the green bar) than they were during the housing crash (the red bars). This was when distressed properties like foreclosures and short sales saturated the market and sold for massive discounts.

However, homes are more affordable today than at any time from 1990 to 2008. NAR’s report on the index also shows 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%.

2. Black Knight’s Mortgage Monitor:

This report reveals that as a result of falling interest rates and slowing home price appreciation, affordability is the best it has been in 18 months. Black Knight Data & Analytics President Ben Graboske explains:

“For much of the past year and a half, affordability pressures have put a damper on home price appreciation. Indeed, the rate of annual home price growth has declined for 15 consecutive months.

More recently, declining 30-year fixed interest rates have helped to ease some of those pressures, improving the affordability outlook considerably…And despite the average home price rising by more than $12K since November, today’s lower fixed interest rates have worked out to a $108 lower monthly payment…Lower rates have also increased the buying power for prospective homebuyers looking to purchase the average-priced home by the equivalent of 15%.”


3. First American’s Real House Price Index:
While affordability has increased recently, Mark Fleming, First American’s Chief Economist 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.”

Fleming goes on to say that the gains in affordability are about mortgage rates and the increase in family incomes:

“Average nominal household incomes are nearly 57 percent higher today than in January 2000. Record income levels combined with mortgage rates near historic lows mean consumer house-buying power is more than 150 percent greater today than it was in January 2000.”


If you’ve put 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!



Reblogged from: http://bit.ly/2TUheAm  



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The data relating to real estate for sale or lease on this web site comes in part from One Key, Inc. Real estate listings held by brokerage firms other than Rummy Dhanoa - eXp Realty - New York Real Estate Experts are marked with the One Key, Inc logo or an abbreviated logo and detailed information about them includes the name of the listing broker.

The information appearing herein has not been verified by One Key, Inc or by any individual(s) who may be affiliated with said entities, all of whom hereby collectively and severally disclaim any and all responsibility for the accuracy of the information appearing at this web site, at any time or from time to time. All such information should be independently verified by the recipient of such data. This data is not warranted for any purpose.

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