Housing Affordability… What’s the Real Story???

Filed under: Market Comentary

Recently two experts have set me straight on what is going on with housing affordability: Walter Neil (the CEO of Franklin Loan Center), and also Barry Habib (a mortgage-backed securities guru). These guys both look at the numbers at a high level. We’ve seen the media getting trapped in some of data that is coming through.

What’s Really Going On?

We are seeing median home prices increasing. But it’s important to note that “median home prices” means that we are measuring the middle number of the homes that are selling (above or below this number). Interestingly, we are seeing that the median home prices are running up in the high end of the market, much more than the movement we are seeing in the low end of the market.

Actual appreciation, according to Barry, is nationally in the 5 – 6% range. Looking at local houses, some of the markets along the west coast is a big higher.

Housing Affordability and a Long-Term Mentality

These numbers lead people to believe that they can’t afford to buy. But the reality is that interest rates give you an edge. Remember that a 1% decrease in rates gives you a 10% increase in purchasing power. We haven’t outstripped the benefits of good interest rates. Even though prices have been running up through the COVID pandemic, it’s been more than offset by the drop-in interest rates.

You need to look at these numbers in the right way: the reality is that prices are moving up and the market is competitive at every price level. But don’t lose sight of the affordability factors that come through low interest rates.

It’s about the payment and the long-term mentality. When you look at the bigger picture, it shows that affordability is actually improving for the moment – although that can change in the future as prices continue to increase. For now, affordability is actually better in our current circumstances than it was a year ago.

Don’t get frustrated by feeling that the market is too much right now. It’s easy to get caught up in the media messages. The best thing you can do is talk to an industry expert to see how your family can benefit from the current affordability factors. If you have questions, then you are welcome to reach out to me any time.

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