Dispelling The Myth About Home Affordability

Dated: 10/11/2018

Views: 391

We’ve all seen the headlines that report that buying a home is less affordable today than it was at any other time in the last ten years, and those headlines are accurate. But, have you ever wondered why the headlines don’t say the last 25 years, the last 20 years, or even the last 11 years?

Read on to learn important info regarding home affordability!


Team Nest Builderknows! The reason is that homes were less affordable 25, 20, or even 11 years ago than they are today.


Obviously, buying a home is more expensive now than during the ten years 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) that were selling at 10-50% discounts. There were so many distressed properties that the prices of non-distressed properties in the same neighborhoods were lowered and mortgage rates were kept low to help the economy.

Low Prices + Low Mortgage Rates = High Affordability

Prices have since recovered and mortgage rates have increased as the economy has gained strength. This has and will continue to impact housing affordability moving forward.


However, let’s give affordability some historical context. The National Association of Realtors (NAR) issues their Affordability Index each month. According to NAR:

“The Monthly Housing Affordability 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 monthly price and income data.”

NAR’s current index stands at 138.8. The index had been higher each of the last ten years, peaking at 197 in 2012 (the higher the index the more affordable houses are).

But, the average index between 1990 and 2007 was just 123 and there were no years with an index above 133. That means that homes are more affordable today than at any time during the eighteen years between 1990 and 2007.

Bottom Line

With home prices continuing to appreciate and mortgage rates increasing, home affordability will likely continue to slide. However, this does not mean that buying a house is not an attainable goal in most markets as it is less expensive today than during the eighteen-year stretch immediately preceding the housing bubble and crash.  Ready to start the process? Call Team Nest Builder’s Lynn Garafola at 973-222-3777 today, or contact our mortgage partner, Adam Wizner, and be sure to download your copy of our FREE Home Buyer’s Guide!

Liked this article? Check out our blog for loads of helpful information on real estate, home improvement and community events!

Source:  KeepingCurrentMatters.com



Latest Blog Posts

The 1 Thing You Can Do Now To Position Yourself To Buy A Home This Year

The #1 Thing You Can Do Now to Position Yourself to Buy a Home This YearThe last few weeks and months have caused a major health crisis throughout the world, leading to a pause in the U.S. economy

Read More

OPEN HOUSE UPDATED 3 BDR Cape Cod

Step into 2 Seneca Trail and this sweet 3-bedroom, 2-bathroom Cape Cod in Sparta’s highly-desirable Lake Mohawk community captures your heart.  See for yourself at our OPEN HOUSE Sunday,

Read More

Breathtaking 4BR Colonial With Swimming Pool OPEN HOUSE THIS WEEKEND

Are you looking for a beautiful 4 Bedroom colonial in Sparta? Look no further than10 Crestview Lane! Join us for an OPEN HOUSE on 2/23 from 1-3pm! PRICE ADJUSTMENT to $550,000!This breathtaking

Read More

Tax Seminar With Team Nest Builder

Paying too much in Real Estate Taxes? Find out how you could get them reduced!In this seminar--hosted by Lynn Garafola of Team Nest Builder--you will learn:4 different “values” for your home

Read More