Moving Up Is MORE Affordable Now Than Almost Any Other Time in 40 Years
If you have held off on moving up to your family’s dream home because you were hoping to time the market, that time has come.
If you are considering selling your current home, to either move up to a larger home or into a home in an area that better suits your current family needs, great news was just revealed. On Mar 07, 2018, Alexandra Lee wrote the article Not Your Father’s Housing Market, which examined home affordability over the last 40+ years (1975-2016). Their research revealed that:
- “Nationally, homes are just about the most affordable they’ve been in the last 40 years. In 2016, the median household could afford a home 1.5 times more expensive than the median home price. In 1980, the median household could only afford about 3/4 of the median home price.
- At the same time, income growth has been outpaced by home price growth. Adjusting for inflation, incomes have grown 27% between 1980 and 2016, while home prices have grown 62%.
- Despite relatively stagnant incomes, affordability has grown due to the sharp drop in mortgage rates over the last 30 years – from a high of over 16% in the 1980s to under 4% by 2016.”
In a REALTOR® Magazine article on March 9, 2018, “NAR’s Chief Economist Lawrence Yun is forecasting home sales to be mostly flat this spring and for most of 2018 compared to a year ago. Yun points to ongoing inventory shortages and housing affordability concerns from rising home prices and mortgage rates.”
Here is a graph showing the Affordability Index compared to the 40-year average:
The graph shows that housing affordability is better now than at any other time in the last forty years, except during the most recent housing crash. (Remember that during the crash you could purchase distressed properties – foreclosures and short sales – at 20-50% discounts from 2006 prices.)
There is no doubt that with home prices and mortgage rates on the rise, the affordability index will continue to fall. That is why if you are thinking of moving up, you probably shouldn’t wait.
Wondering if you will be approved for a mortgage for a bigger home? Talk to a lender today!