RSS Feed

The ‘REAL’ News about Housing Affordability

The 'REAL' News about Housing Affordability | Simplifying The Market

Some industry experts are claiming that the housing market may be headed for a slowdown as we proceed through 2017, based on rising home prices and a potential jump in mortgage interest rates. One of the data points they use is the Housing Affordability Index, as reported by the National Association of Realtors (NAR).

Here is how NAR defines the index:

“The Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national level based on the most recent price and income data.”

Basically, a value of 100 means a family earning the median income earns enough to qualify for a mortgage on a median-priced home, based on the price and mortgage interest rates at the time. Anything above 100 means the family has more than enough to qualify.

The higher the index, the easier it is to afford a home.

Why the concern?

The index has been declining over the last several years as home values increased. Some are concerned that too many buyers could be priced out of the market.

But, wait a minute…

Though the index skyrocketed from 2009 through 2013, we must realize that during that time, the housing crisis left the market with an overabundance of distressed properties (foreclosures and short sales). All prices dropped dramatically and distressed properties sold at major discounts. Then, mortgage rates fell like a rock.

The market is recovering, and values are coming back nicely. That has caused the index to fall.

However, let’s remove the crisis years (shaded in gray) and look at the current index as compared to the index from 1990 – 2008:

The 'REAL' News about Housing Affordability | Simplifying The Market

Though prices and rates appear to be increasing, we must realize that affordability is composed of three ingredients: home prices, interest rates, and income. And, incomes are finally rising.

ATTOM Data Solutions recently released their Q1 2017 U.S. Home Affordability Index. The report explained:

“Stronger wage growth is the silver lining in this report, outpacing home price growth in more than half of the markets for the first time since Q1 2012, when median home prices were still falling nationwide. If that pattern continues, it will help turn the tide in the eroding home affordability trend.”

Bottom Line

Compared to historic norms, it is still a great time to buy from an affordability standpoint.

from Simplifying the Market™ http://ift.tt/2nfjyVH
via IFTTT

Advertisements

About Bradley Newton- RE/MAX Agent

Providing personalized real estate services to clients looking to buy, sell or invest in real estate. Exceeding expectations with on-going support and communication throughout the entire process. Serving your housing and business needs in Monroe County area and surrounding counties. Look to me to assist you in obtaining your real estate goals. OPENING DOORS- FULFILLING DREAMS

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: