Key points:
- The current housing market is heavily geared towards sellers, and high demand for homes can lead to competitive prices for home buyers.
- Historically low mortgage rates are contributing to the affordability of today’s homes because homeowners will pay thousands less in interest over the lifespan of their loan.
- Want to take advantage of today’s surprisingly affordable market and record-low interest rates? Contact us today to get started!
Is Buying a Home Today Affordable?
Currently, there are 39% fewer homes for sale today than there were last year. While there are fewer listings on the market right now, there is an undeniable demand for homes amongst buyers that remains high. Like anything with supply and demand, if there is less of something that is currently a hot commodity (such as real estate), then that can lead to the prices going up.
For sellers, this is great news! Home values are surging and they are reaping the rewards. For buyers, it increases competition and can potentially lead them to be priced out of their budget. However, there are a multitude of factors that have actually made today’s homes more affordable than ever before.
Financial factors that contribute to purchasing a home
The good news for buyers is that buying a house doesn’t necessarily come down to the purchase price. While that can contribute to the overall cost of a home, it is important to remember it is not the only financial factor that goes into your big purchase. Mortgage rates also play a big role in determining how much you can spend. In other words, the monthly cost of the home can help determine if a buyer can afford the home.
The Housing Affordability Index
The National Association of Realtors makes a Housing Affordability Index, which considers these different financial factors and determines an affordable score for housing based on a typical household’s earnings. For a median-priced home, a score at or over 100 means the home buyer can afford to live there with a 20 percent down payment. In simple terms, if you have a higher index, it is more affordable to buy a home. The trends for this year show that today’s market remains very affordable in comparison to housing trends of years past.
How does this benefit potential home buyers?
You may be wondering how it’s possible for homes to be affordable even with high buyer demand. The answer? Historically low mortgage rates continue to set records each day. In comparison to last year, mortgage rates continue to stay low even as the economy fluctuates. If purchasing a home has been something you have been considering for a while now, it is important to understand just how affordable today’s homes are for buyers. Though purchase prices may be high due to competition, you may end up saving a large amount of money throughout the duration of your home loan if you can secure a low rate.
It is important to note that even though mortgage rates are historically low at this time, you should keep an eye on increasing home prices. If household income growth doesn’t match the increase in prices, then the home you may be interested in could grow past the affordability index that makes it possible for potential buyers to invest in a home.
Wondering if You Can Afford to Purchase?
Are you still contemplating if you can afford to buy in today’s housing market? Contact the Jim Dolanch Team today so we can answer all of your questions regarding financing your future home. If you need help finding the perfect home, check out our buyer resources. We would love to help you find a home that suits all of your needs, so reach out today!