Homes are More Affordable in 44 out of 50 States

With both home prices and mortgage rates increasing this year, many are concerned about a family’s ability to purchase a major part of the American Dream – its own home. However, if we compare housing affordability today to the average affordability prior to the housing boom and bust, we are in much better shape than most believe. In Black Knight’s latest monthly Mortgage Monitor, they revealed that in the vast majority of the country, it is actually more affordable to purchase a home today than it was between 1995 to 2003 when looking at mortgage payments (determined by price and interest rate) as compared to incomes. Home prices are up compared to 1995-2003, but mortgage rates are still much lower now than at that time. Today, they stand at about 4.5%. Here are the average mortgage rates for each of the years mentioned: 1995 – 7.93% 1996 – 7.81% 1997 – 7.6% 1998 – 6.94% 1999 – 7.44% 2000 – 8.05% 2001 – 6.97% 2002 – 6.54% 2003 – 5.83% On the other hand, wages have risen over the last twenty years. Black Knight’s research revealed that, when comparing “the share of median income required to buy the median-priced home” today, to the average between 1995 to 2003, it is currently more affordable to purchase a home in 44 of 50 states. Here is a state map of the percentage change in the price-to-payment ratio. Positive numbers indicate that it is less affordable to buy while negative numbers indicate that it is more affordable. Bottom Line Whether you are moving up to the home of your dreams or purchasing your first house, it is a great time to buy when looking at historic affordability data.

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A New Housing Bubble Forming…Not Before 2024!

  A recent report by CoreLogic revealed that U.S. home values appreciated by more than 37% over the last five years. Some are concerned that this is evidence we may be on the verge of another housing “boom & bust” like the one we experienced from 2006-2008. Recently, several housing experts weighed in on the subject to alleviate these fears. Sean Becketti, Freddie Mac Chief Economist  “The evidence indicates there currently is no house price bubble in the U.S., despite the rapid increase of house prices over the last five years.” Edward Golding, a Senior Fellow at the Urban Institute’s Housing Finance Policy Center  “There is not likely to be a national bubble in the way that we saw the first decade of the century.” Christopher Thornberg, Partner at Beacon Economics  “There is no direct or indirect sign of any kind of bubble.” Bill McBride, Calculated Risk  “I wouldn’t call house prices a bubble.” David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices  “Housing is not repeating the bubble period of 2000-2006.” A recent article by Teo Nicolais, a real estate entrepreneur who teaches courses on real estate principles, markets, and finance at Harvard Extension School concluded that the next housing bubble may not occur until 2024. The article, How to Use Real Estate Trends to Predict the Next Housing Bubble, looks at previous peaks in real estate values going all the way back to 1818. Nicolais uses the research of several economists. The article details the four phases of a real estate cycle and what defines each phase. Nicolais concluded his article by saying: “Those who study the financial crisis of 2008 will (we hope) always be weary of the next major crash. If George, Harrison, and Foldvary are right, however, that won’t happen until after the next peak around 2024.  Between now and then, aside from the occasional slow down and inevitable market hiccups, the real estate industry is likely to enjoy a long period of expansion.” Bottom Line The reason for the price appreciation we are seeing is an imbalance between supply and demand for housing. This has created a natural increase in values, not a bubble in prices. You might also enjoy reading… There’s More to a Bubble Than Rising Home Prices Top 5 Reasons to Hire a Real Estate Professional When Buying or Selling! Competition is Coming, Are You Thinking of Selling Your Home? 4 Reasons to Sell This Spring [INFOGRAPHIC]

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4 Reasons to Sell This Spring [INFOGRAPHIC]

Some Highlights: Buyer demand continues to outpace the supply of homes for sale which means that buyers are often competing with one another for the few listings that are available! Housing inventory is still under the 6-month supply needed to sustain a normal housing market. Perhaps the time has come for you and your family to move on and start living the life you desire. You might also enjoy reading… Top 5 Reasons to Hire a Real Estate Professional When Buying or Selling! The #1 Reason to Sell Now Before Spring 2 Major Myths Holding Back Home Buyers Mortgage Rates on FIRE! Home Prices Up in Smoke?

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