The Truth About the Affordability in the Housing Market

Affordability in the housing market. Do you wonder what the truth is? Lately, there have been many headlines circulating about whether or not there is an “affordability issue forming in the housing market.”

We have all seen the headlines that report that buying a home is less affordable today than it was at any other time in the last ten years. Those headlines are accurate. Have you ever wondered why the headlines don’t say the last 25 years, the last 20 years, or even the last 11 years?

The reason is that homes were less affordable 25, 20, or even 11 years ago than they are today.

Obviously, buying a home is more expensive now than during the ten years immediately following one of the worst housing crashes in American history. Over the past decade, the market was flooded with distressed properties. Foreclosures and short sales were selling at 10-50% discounts. There were so many distressed properties that the prices of non-distressed properties in the same neighborhoods were lowered and mortgage rates were kept low to help the economy.

According to NAR:

“A value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that a family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment.”

The national index results for August came in at 141.2.
This is up from 138.9 in July, but down 8.3% from last August’s value of 153.9.

One big factor in determining affordability each month is the interest rate available at the time of calculation. In August 2017, the 30-year fixed rate mortgage interest rate was 4.19%. This August, the rate rose to 4.78%!

With an index reading of 141.2, housing remains affordable in the U.S.

Where you live matters

Regionally, affordability is up in three out of four regions. The Northeast had the biggest gain at 6.2%. The South had an increase of 2.4% followed by the West with a slight increase of 0.1%. The Midwest had the only dip in affordability at 4.8%.

Despite month-over-month changes, the most affordable region remains the Midwest, with an index value of 175.7. The West remains the least affordable region at 101.2. For comparison, the index was 146.7 in the South, and 151.2 in the Northeast.

Recent statistics rank Georgia #30 in the nation’s list of affordable states. This is due in part to the high number of residents with large student loans. At least they are an educated bunch of home buyers!

Median list price: $254,900
Estimated time to save for a down payment: 4.8 years
Monthly mortgage payment: $1,388
Millennials in Georgia earn an average of $53,084 every year, or $4,423.67 per month.