Home prices have risen for 97 consecutive months, so how can they be considered more affordable today than a few years ago? While it is reasonable to automatically jump to the conclusion that if the cost of a house increases the affordability will decrease. However, the low mortgage rates we are experiencing now are the major contributing factors to the affordability of homes, even as prices continue to increase.
Let’s break it down:
According to the Mortgage Monitor Report from Black Knight:
“As of mid-July, it required 19.8% of the median monthly income to make the mortgage payment on the average-priced home purchase, assuming a 20% down payment and a 30-year mortgage. That was more than 5% below the average of 25% from 1995-2003.
This means it currently requires a $1,071 monthly payment to purchase the average-priced home, which is down 6% from the same time last year, despite the average home increasing in value by more than $12,000 in the same period.
Buying power is now up 10% year-over-year, meaning the average home buyer can afford nearly $32,000 more home than they could at the same time last year while keeping their monthly payment the same.”
Nationally, homebuyers can now afford 10% more house today than what they could buy just a year ago. The bottom line is that you can borrow more cheaply, making homes more affordable for your loan. Florida specifically has not seen homes this affordable since 2017.
Mark Fleming, Chief Economist at First American, has this to say about what low mortgage rates mean for affordability:
“In July, house-buying power got a big boost as the 30-year, fixed mortgage rate made history by moving below three percent. That drop in the mortgage rate from 3.23 percent in May to 2.98 percent in July increased house-buying power by nearly $15,000.”
If you’re thinking of buying a home today, NOW is the best time to secure a low-interest rate mortgage loan and flex your buying power. Call, text, email, or DM me today to get you going on getting you into the home of your dreams.
The information contained in this article is not intended to be investment advice. Always conduct your own research and obtain professional advice before making any investment decision.