Busting the Myth About a Housing Affordability Crisis

It seems you can’t find a headline with the term “housing affordability” without the word “crisis” attached to it. That’s because some only consider the fact that residential real estate prices have continued to appreciate. However, we must realize it’s not just the price of a home that matters, but the price relative to a purchaser’s buying power.

Homes, in most cases, are purchased with a mortgage. The current mortgage rate is a major component of the affordability equation. Mortgage rates have fallen by over a full percentage point since December 2018. Another major piece of the affordability equation is a buyer’s income. The median family income has risen by 3.5% over the last year.

Let’s look at three different reports issued recently that reveal how homes are very affordable in comparison to historic numbers, and how they have become even more affordable over the past several months.

1. National Association of Realtors’ (NAR) Housing Affordability Index:

Here is a graph showing the index going all the way back to 1990. The higher the column, the more affordable homes are:Busting the Myth About a Housing Affordability Crisis | MyKCMWe can see that homes are less affordable today (the green bar) than they were during the housing crash (the red bars). This was when distressed properties like foreclosures and short sales saturated the market and sold for massive discounts. However, homes are more affordable today than at any time from 1990 to 2008.

NAR’s report on the index also shows that the percentage of a family’s income needed for a mortgage payment (16.5%) is dramatically lower than last year and is well below the historic norm of 21.2%.Busting the Myth About a Housing Affordability Crisis | MyKCM

2. Black Knight’s Mortgage Monitor:

This report reveals that as a result of falling interest rates and slowing home price appreciation, affordability is the best it has been in 18 months. Black Knight Data & Analytics President Ben Graboske explains:

“For much of the past year and a half, affordability pressures have put a damper on home price appreciation. Indeed, the rate of annual home price growth has declined for 15 consecutive months. More recently, declining 30-year fixed interest rates have helped to ease some of those pressures, improving the affordability outlook considerably…And despite the average home price rising by more than $12K since November, today’s lower fixed interest rates have worked out to a $108 lower monthly payment…Lower rates have also increased the buying power for prospective homebuyers looking to purchase the average-priced home by the equivalent of 15%.”

3. First American’s Real House Price Index:

While affordability has increased recently, Mark Fleming, First American’s Chief Economist explains:

“If the 30-year, fixed-rate mortgage declines just a fraction more, consumer house-buying power would reach its highest level in almost 20 years.”

Fleming goes on to say that the gains in affordability are about mortgage rates and the increase in family incomes:

“Average nominal household incomes are nearly 57 percent higher today than in January 2000. Record income levels combined with mortgage rates near historic lows mean consumer house-buying power is more than 150 percent greater today than it was in January 2000.”

Bottom Line

If you’ve put off the purchase of a first home or a move-up home because of affordability concerns, you should take another look at your ability to purchase in today’s market. You may be pleasantly surprised!

Expert Insights on the Current Housing Market

The current housing landscape presents greater home values, low interest rates, and high buyer demand. All of these factors point to the strong market forecasted to continue throughout the rest of the year.

There is, however, one thing that may cause the industry to tap the brakes: an overall lack of housing inventory. Buyer demand naturally increases during the summer months, but the current supply is not keeping up.

Here is a look at what a few industry experts have to say:

Lawrence Yun, Chief Economist at National Association of Realtors

“Imbalance persists for mid-to-lower priced homes with solid demand and insufficient supply, which is consequently pushing up home prices.”

Mark Fleming, Chief Economist of First American

“Market conditions are ripe for increasing home sales with one glaring exception. The supply of homes for sale remains tight, keeping existing home sales below potential.”

Danielle Hale, Chief Economist of Realtor.com

“We’re not seeing as many new listings come up on the market…It was only 18 months ago that the number of homes for sale hit its lowest level in recorded history and sparked the fiercest competition among buyers we’ve ever seen.”

Bottom Line

If you’re thinking of selling, now may be the time. Demand for your house will be strong during a period when there is very little competition, ideally leading to a quick sale and a great return on your investment.

*credit to KeepingCurrentMatters

Why Use Beach Team!

Testimonials from clients!

Debra Hilse’s home sold well above list price thanks to Beach Team! 

“Steve Nader is one of the nicest, and most professional real estate agents we’ve ever met. He works so hard to make sure everything is taken care of in every aspect of your real estate needs. He was always there when we needed him. He will make sure you get the highest price possible for your home. He has a great team working with him as well. Both Steve and his operations assistant Suzanne go above and beyond to help you, even as far as volunteering to come and help you get ready for open house etc. You will not be disappointed. Even though we gave Steve Nader a hard time most of the time and joked around with him he always had a good attitude. Steve and Suzanne are both great people and fun to work with,  we are going to miss them both.”

Cynthia Cerda gave Beach Team a 5 star review after we helped her purchase a Condo home in 2019 in Lakewood Village, Long Beach, CA. Here’s what she said:

“I started my home search a year ago, randomly met Steve when I posed interest in a condo in which he was the listing agent. He was very charismatic but genuine and knew what he was talking about. He invited me to come into the office to meet with him and the lender. I stopped looking for a while  and started up the process again in January 2019. I consider myself picky considering I had a few restraints but Steve was very patient with me and found me the perfect condo in Lakewood Villave. I highly recommend Steve!”

Moses bought a Single Family home in 2019 in Zaferia, Long Beach, CA. Here’s what Moses said about Steve and Beach Team! 

“My fiancee and I found Steve while searching Long Beach properties on Zillow. He showed us two properties, but we already knew the one  that we wanted. He referred us to a great mortgage broker and escrow company, as well as an excellent local home inspector who was as thorough as one can be. We  had a few hiccups with our own personal situation, and Steve managed to keep the ball rolling with escrow extensions, etc. We’re finally in our new home, couldn’t be happier, and couldn’t have done it without Steve. Look no further, Steve’s your guy.”

Christina O gave another 5 star review after we helped her find the perfect 3 bed/ 2 bath home in Long Beach!

“We had a realtor we worked with for many years in the past but we chose to work with Steve when we decided to buy in Long Beach because we weren’t very familiar with the Long Beach area and couldn’t really figure out which specific areas of Long Beach were going to be good for us. We met Steve at an open house and chose to work with him even though we didn’t know him at all because he seemed to be very knowledgeable about the area and was really good at catching what we were looking for. We also felt like he was smart and competent. Steve educated us on all the different neighborhoods in Long Beach and we drove around to get a vibe of the different areas. We were able to make a decision to make an offer on a house right away and Steve did not disappoint in being a competent realtor. What we appreciated about Steve the most is his responsiveness and the way he explained every process. He was always available and thoroughly answered all our questions. He also connected us to an airbnb rental owned by his friend because the timing of our moving out of our old place and moving in to the new place didn’t line up. It was a pleasant stay. One thing I would have appreciated more is if Steve was more open about giving advice and sharing his honest perspective during counter offering process. I do understand that he was being cautious.

All in all, it was a pleasure to work with Steve and his team and I would recommend him to anyone looking to buy in Long Beach!”

Aric Lewis gave another 5 star review after his purchase of a Single Family home in 2019 in California Heights, Long Beach, CA.

“Steve Nader is everything you want in an agent. Hard working, straightforward and a great negotiator.He made the stressful process go smoothly for us and we are happy with our new home.”

Christina Sandler gave a 5 star review after we helped her buy a Single Family home in 2019 in Belmont Heights, Long Beach, CA.

“We had been looking for a new home for almost 2 years before working with Steve.  He helped us find our first home in just a few months. (And not just any house!) The house that checked off everything on our list, was exactly what we wanted, and was a very competitive listing.  (We had put in offers before, but were never even in the running in this competitive market.) Thank you, Steve, for your hard work and expert guidance! Being a first-time home buyer can be a little scary, and stressful, but we knew we were in good hands with the beach team on our side.  We couldn’t be happier! Thank you, again!”

Beach Team delivers you outstanding services with an elevated experience! Call us today!

📞 562.673.7831