The Truth About Housing Affordability
From a purely economic perspective, this is one of the best times in American history to buy a home. Black Night Financial Services discusses this in their most recent Monthly Mortgage Monitor.
Here are two of the report’s revelations:
- The average U.S. home value increased by $13,500 from last year, but low interest rates have kept the monthly principal & interest payment needed to purchase a median-priced home almost equal to one year ago.
- Home affordability still remains favorable compared to long-term historic norms.
The report explains:
“Even though the value of the average home in the U.S. increased by about $13,500 over the last year, thanks to declining interest rates it actually costs almost exactly the same in principal and interest each month to purchase as it did this time last year.
Even taking into account the fact that affordability can vary – sometimes significantly – across the country based upon the different rates of home price appreciation we’re seeing, that’s a pretty incredible balancing act between interest rates and home prices at the national level…
Right now, it takes 20 percent of the median monthly income to cover monthly payments on the median-priced home, which is well below historical norms.”
However, the report warns that affordability will be dramatically impacted by an increase in mortgage rates.
“A half-point increase in interest rates would be equivalent to a $17,000 jump in the average home price, and bring that ratio to 21.5 percent. This increase is still below historical norms, but puts more pressure on homebuyers.”
If you are ready and willing to purchase a home of your own, let’s get together to find out if you are able to. Now is a great time to jump in.
Source: Michigan Real Estate Updates