Affordability is the front-runner in worries of anyone looking to buy their first or upgrade their existing home, and for good reason. Looking back on the years following 2008, the reality of not being able to pay the mortgage you qualify for still resonates with a lot of people in the market to buy a home.
The concern circling home value appreciation is founded in recent history. According to Skylar Olsen, Director of Economic Research at Zillow, “A year ago, a combination of a government shutdown, stock market slump and mortgage rate spike caused a long-anticipated inventory rise. That supposed boom turned out to be a short-lived mirage as buyers came back into the market and more than erased the inventory gains. As a natural reaction, the recent slowdown in home values looks like it’s set to reverse back.”
People watching home costs see the uptick and it has caused a bit of an overall concern, but realistically, home costs it is not the only criteria when gauging home affordability.
According to the January 2020 Market Pulse Report:
• 21 states appreciating 5% or more
• 26 states appreciating between 3-5%
• Only 3 states appreciating less than 3%
Let’s break it down.
Home cost is, of course, a factor in your ability to afford your next mortgage, but a healthy home market means increases in home values year to year. These increases benefit home sellers and could easily increase the inventory available in your target area, making finding your perfect home easier.
When you are looking to buy a home, mortgage rates and buyer income are the secondary and tertiary criteria. Mortgage rates have fallen over a percentage point over the last year and median household income has risen 5%.
The math results in very realistic home affordability.
Black Knight’s Mortgage Monitor extrapolates on these details:
“Despite the average home price increasing by nearly $13,000 from just over a year ago, the monthly mortgage payment required to buy that same home has actually dropped by 10% over that same span due to falling interest rates.
Compound your success potential as you look to buy your next home by partnering with a local real estate and mortgage expert to get the pulse of your area. Good luck!