google-site-verification=xO4V1iJzxFqIsUm17Mw7uW1jEmlSRLwDz3xxXpR1LmE

How To Get A Better Perspective On Affordability

Dated: 03/07/2019

Views: 43

How to Get a Better Perspective on Affordability | MyKCM

Headlines spotlight the fact that buying a home is less affordable today than it was at any other time in more than a decade. Those headlines are accurate.

Understandably, buying a home is more expensive now than 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) selling at 10-50% discounts. There were so many that this lowered the prices of non-distressed homes in the same neighborhoods. As a result, mortgage rates were kept low to help the economy.

Prices have since recovered. Mortgage rates have increased as the economy has gained strength. This has impacted housing affordability. However, it’s necessary to give historical context to the subject of affordability.

Two weeks ago, CoreLogic reported on what they call the “typical mortgage payment”. As they explain:

“One way to measure the impact of inflation, mortgage rates and home prices on affordability over time is to use what we call the ‘typical mortgage payment.’ It’s a mortgage-rate-adjusted monthly payment based on each month’s U.S. median home sale price. It is calculated using Freddie Mac’s average rate on a 30-year fixed-rate mortgage with a 20 percent down payment...

The typical mortgage payment is a good proxy for affordability because it shows the monthly amount that a borrower would have to qualify for to get a mortgage to buy the median-priced U.S. home…

When adjusted for inflation, the typical mortgage payment puts homebuyers’ current costs in the proper historical context.”

Here is a graph showing the results of CoreLogic’s research:

How to Get a Better Perspective on Affordability | MyKCM

As the graph indicates, the most recent calculation remained 28% below the all-time peak of $1,275 in June 2006. That’s because the average mortgage rate at that time was 6.68%. As seen in the graph, both today’s typical payment and CoreLogic’s projection for the end of the year are less than it was in January 2000.

Bottom Line

Even though home prices are appreciating at a slower rate, home affordability will likely continue to slide. However, this does not mean that buying a house is an unattainable goal in most markets. It is still less expensive today than it was prior to the housing bubble and crash.


Thinking of relocating to SWFLA. Contact the Real Estate Experts - 941-626-9000

Blog author image

Leo Albanes

I am a Licensed Florida Real Estate Broker, Realtor®, and Owner of Charlotte County Properties Inc for over 16 years. In that time, I have received many review, awards and testimonials demonstrating....

Latest Blog Posts

Use Your Tax Refund To Buy A Home In 2019

 to Your Tax Refund Is The Key To Homeownership!According to data released by the Internal Revenue Service (IRS), Americans can expect an estimated average refund of $3,143

Read More

How To Increase Your Familys Wealth

Everyone should realize that unless you are living somewhere rent-free, you are paying a mortgage – either yours or your landlord’s. Buying your own home provides you with a form of

Read More

Top 7 Things You Shouldnt Do After Applying For A Mortgage

Congratulations! You’ve found a home to buy and have applied for a mortgage! You are undoubtedly excited about the opportunity to decorate your new home! But before you make any big purchases,

Read More

Top 4 Reasons Why You Should Buy A Home This Spring

Spring has sprung, and it’s a great time to buy a home! Here are four reasons to consider buying today instead of waiting.1. Real Estate Prices Will Continue to RiseCoreLogic’s latest U.S.

Read More