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The Ultimate Truth about Housing Affordability

Thursday, May 30, 2019   /   by Brandon Gonzales

The Ultimate Truth about Housing Affordability

There have been many headlines decrying an “affordability crisis” in the residential real estate market. While it is true that buying a home is less affordable than it had been over the last ten years, we need to understand why and what that means.


On a monthly basis, the National Association of Realtors (NAR), produces a Housing Affordability Index. According to NAR, the index…



“…measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels based on the most recent price and income data.”



Their methodology states:



“To interpret the indices, 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 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.”



So, the higher the index, the more affordable it is to purchase a home. Here is a graph of the index going back to 1990:


The Ultimate Truth about Housing Affordability | MyKCM


It is true that the index is lower today than any year from 2009 to 2017. However, we must realize the main reason homes were more affordable. That period of time immediately followed a housing crash and there were large numbers of distressed properties (foreclosures and short sales). Those properties were sold at large discounts.


Today, the index is higher than any year from 1990 to 2008. Based on historic home affordability data, that means homes are more affordable right now than any other time besides the time following the housing crisis.


With mortgage rates remaining low and wages finally increasing, we can see that it is MORE AFFORDABLE to purchase a home today than it was last year!


Bottom Line


With wages increasing, price appreciation moderating, and mortgage rates remaining near all-time lows, purchasing a home is a great move based on historic affordability numbers.

Iron Key Real Estate
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Fresno, CA 93711
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Based on information from California Regional Multiple Listing Service, Inc. as of November 27, 2020. This information is for your personal, non-commercial use and may not be used for any purpose other than to identify prospective properties you may be interested in purchasing. Display of MLS data is usually deemed reliable but is NOT guaranteed accurate by the MLS. Buyers are responsible for verifying the accuracy of all information and should investigate the data themselves or retain appropriate professionals. Information from sources other than the Listing Agent may have been included in the MLS data. Unless otherwise specified in writing, Broker/Agent has not and will not verify any information obtained from other sources. The Broker/Agent providing the information contained herein may or may not have been the Listing and/or Selling Agent.
Information is provided exclusively for consumers’ personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. Data is deemed reliable, but is not guaranteed accurate by the MLS. Copyright 2020 Last Updated November 27, 2020
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