The Truth About Home Affordability

Catherine Burgess

11/11/17

There’s a lot of discussion about the current state of housing affordability…and most of them are tarnished with a negative slant.

If we look at the market historically, we’ll discover that housing affordability today is better than almost any time in our history. Home prices collapsed during the housing crash and foreclosures and short sales kept home values depressed for years. So, if we compare affordability to the decades before the crash, we will see a different story.

The graph below from National Association of Realtor’s Housing Affordability Index shows the affordability is better today than in fifteen years prior to the boom and bust. It also shows that home values correlate directly with home affordability.

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In the report National Homebuyers’ Typical Mortgage Payment published by CoreLogic, it shows typical housing payment today was less expensive than it was in 2000 as shown in the graph below.

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Mark Fleming, Chief Economist at First American, explained it best:

“While borrowing power for the potential home buyer has fallen relative to the low point of 2012, it remains high today and will remain high next year, relative to the long run average. If you don’t want to rent anymore and are considering becoming a homeowner, even if mortgage rates rise next year, your borrowing power will remain strong by historic standards.”

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