If you have someone wavering—like those first-time homebuyers who are convinced they missed the boat for affordable home mortgage financing—tell them to run and jump for that ship. It looks like it is about to set sail, but it has not quite left the dock. While everything might have them believing differently, according to Trulia homes are just about the most affordable they have been in the last four decades. Yes, that was decades—forty years. Way before you could book a cruise online and possibly before the house was even built.
What Trulia did was construct an affordability score where they compared the highest price a median household could afford with median actual home prices that year. That median household’s highest affordable price is the maximum buying power, assuming a 20% down payment. Any score over 100 means housing is affordable. While it is a little dated, looking back to 2016, Trulia estimates the median household could afford a home that was 1.5 times the median home price. Back in 1980, that same median household could only afford ¾ of that median priced home.
Cruising the home-buying waters in 2018 with home prices up and rates rising, the affordability ship is about to leave the harbor.
The main reason homes are more affordable now? Interest rates. Home prices have most definitely outpaced income growth over the past 40 years, but interest rates remain remarkably low—even at what some consumers might think are horrific in the mid 4’s. Some first-time home buyers were not even born when interest rates for a mortgage were in the mid-teens in the early 80’s.
So, if you have some hold outs that are worried about taking the mortgage voyage, have them call Embrace. We can walk them through as many affordable mortgage options as they want and help them find whatever they need.