47% of New Buyers Surprised by How Affordable Homes Are Today

Headlines matter. Right now, it’s hard to read about real estate without seeing a headline that suggests homes have become unaffordable for most Americans. In reality, there’s hard evidence that shows how owning a home is more affordable than renting in most parts of the country, as record-low interest rates are keeping monthly mortgage payments about 23% lower than the typical payment of 20 years ago. Despite the facts, misleading headlines persist, and they impact how hopeful homebuyers perceive the market.

In a recent survey by realtor.com, home shoppers indicated they were surprised by what they could actually afford when buying their first home. In fact, 47% discovered their budget was larger than they expected. George Ratiu, Senior Economist at realtor.com, explains:

“For first-time buyers, especially, the drop in the 30-year mortgage rate…has provided unexpected leverage. Lower rates allowed many buyers to stretch and buy more expensive homes while keeping their monthly budget the same.”
So why do these negative headlines that cast doubt on affordability continue to exist?

Most analysts only look at two of the three elements that make up the affordability equation: price and income. It’s true that incomes haven’t kept up with the price of houses. However, affordability is about the cost of the home, not just the price. For that reason, mortgage rates, the third element of the affordability equation, are important to consider.

For example, here’s the typical mortgage payment for assorted dates going back to 2000, as calculated by CoreLogic:

Outside of the housing crash (when short sales and foreclosures drove prices down), it’s more affordable to buy a home today when you consider all three elements of the affordability equation: price, income, and mortgage rate.

Bottom Line

Whether you’re a first-time buyer or a move-up buyer, don’t let the headlines scare you away from your dream of homeownership. Instead, connect with mortgage and real estate professionals to determine what you can afford and what’s available at that price. Like almost half of the buyers in the survey, you may be pleasantly surprised.

Looking to Buy, Sell, or Invest? Contact:

David Demangos - eXp Realty
Cell: 858.232.8410 | Realtor® DRE# 01905183
www.AwesomeSanDiegoRealEstate.com
We Go to Extremes to Fulfill Real Estate Dreams!

San Diego Real Estate Expert | Global Property Specialist
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Green Specialist | Certified International Property Specialist
2016, 2017, 2018,& 2019 Recognition of Excellence Award Winner SDAR

Experts Weigh-In on the Remarkable Strength of the Housing Market

America has faced its share of challenges in 2020. A once-in-a-lifetime pandemic, a financial crisis leaving millions still unemployed, and an upcoming presidential election that may prove to be one of the most contentious in our nation’s history all continue to test this country in unimaginable ways.

Even with all of that uncertainty, the residential real estate market continues to show great resilience. Here’s a look at what the experts have said about the housing market over the past few weeks.

Ivy Zelman, CEO of Zelman & Associates:

“Whether in terms of pending contract activity or our proprietary buyer demand ratings, the various measures of demand captured in this month’s survey can only be described as shockingly strong, in spite of the resurgence in COVID-19 cases.”

Logan Mohtashami, Lead Housing Analyst at HousingWire:

“Existing home sales are still down year over year by 11.3%, but as crazy as this might sound, we have a shot at getting positive year-over-year growth…We may see an existing home sales print of 5,510,000 in 2020.”

Matthew Speakman, Zillow Economist:

“In a remarkable show of resilience, the housing market has stared the pandemic right in the eye and hasn’t blinked.”

Todd Teta, Chief Product Officer for ATTOM Data Solutions:

“The housing market across the United States pulled something of a high-wire act in the second quarter, surging forward despite the encroaching economic headwinds resulting from the Coronavirus pandemic.”

Ali Wolf, Chief Economist of Meyers Research:

“The housing recovery has been nothing short of remarkable. The expectation was that housing would be crushed. It was—for about two months—and then it came roaring back.”

Clare Trapasso, Senior News Editor of realtor.com:

“Despite the crippling and ongoing coronavirus pandemic, millions out of work, a recession, a national reckoning over systemic racism, and a highly contentious presidential election just around the corner, the residential real estate market is staging an astonishing rebound.”

Bill Banfield, EVP of Capital Markets at Quicken Loans:

“The pandemic has not stopped the consistent home price growth we have witnessed in recent years.”

Economic & Strategic Research Group at Fannie Mae:

“Recent home purchase measures have continued to show remarkable strength, leading us to revise upward our home sales forecast, particularly over the third quarter. Similarly, we bumped up our expectations for home price growth and purchase mortgage originations.”

Mark Fleming, Chief Economist at First American:

“It seems hard to deny that when one looks at many of the housing market statistics, a “V” shape is quite apparent.”

Bottom Line

The experts seem to agree that residential real estate is doing remarkably well. If you’re thinking of jumping into the housing market (whether buying or selling), this may be the perfect time.

Looking to Buy, Sell, or Invest? Contact:

David Demangos - eXp Realty
Cell: 858.232.8410 | Realtor® DRE# 01905183
www.AwesomeSanDiegoRealEstate.com
We Go to Extremes to Fulfill Your Real Estate Dreams!

San Diego Real Estate Expert | Global Property Specialist
Certified Luxury Marketing Specialist | CLHMS Million Dollar Guild Agent
Green Specialist | Certified International Property Specialist
2016, 2017, 2018,& 2019 Recognition of Excellence Award Winner SDAR

Taking Advantage of Homebuying Affordability in Today’s Market

Everyone is ready to buy a home at different times in their lives, and despite the health crisis, today is no exception. Understanding how affordability works and the main market factors that impact it may help those who are ready to buy a home narrow down their optimal window of time to make a purchase.

There are three main factors that go into determining how affordable homes are for buyers:
Mortgage Rates

Mortgage Payments as a Percentage of Income

Home Prices

The National Association of Realtors (NAR), produces a Housing Affordability Index, which takes these three factors into account and determines an overall affordability score for housing. According to NAR, the 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 price and income data.”

Their methodology states:

“To interpret the indices, a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment.”

So, the higher the index, the more affordable it is to purchase a home. Here’s a graph of the index going back to 1990:The green bar represents today’s affordability. We can see that homes are more affordable now than they have been at any point since the housing crash when distressed properties (foreclosures and short sales) dominated the market. Those properties were sold at large discounts not seen before in the housing market.Why are homes so affordable today?

Although there are three factors that drive the overall equation, the one that’s playing the largest part in today’s homebuying affordability is historically low mortgage rates. Based on this primary factor, we can see that it is more affordable to buy a home today than at any time in the last seven years.

If you’re considering purchasing your first home or moving up to the one you’ve always hoped for, it’s important to understand how affordability plays into the overall cost of your home. With that in mind, buying while mortgage rates are as low as they are now may save you quite a bit of money over the life of your home loan.

Bottom Line

If you feel ready to buy, purchasing a home this season may save you significantly over time based on historic affordability trends. Let’s connect today to determine if now is the right time for you to make your move.

Looking to Buy, Sell, or Invest? Contact:

David Demangos - eXp Realty
Cell: 858.232.8410 | Realtor® DRE# 01905183
www.AwesomeSanDiegoRealEstate.com
We Go to Extremes to Fulfill Real Estate Dreams!

2 Trends Helping Keep Housing Affordable

Two positive trends have started to emerge that impact the 2019 Spring Housing Market. Mortgage interest rates for a 30-year fixed rate loan have dropped to new lows, right as reports show that wages have increased at their highest rate in decades!

These two factors have helped keep housing affordable despite low supply of houses for sale driving up prices. First American’s Chief Economist, Mark Fleming, explains the impact,

“Ongoing supply shortages remain the main driver of the performance gap as the housing market continues to face an inventory impasse – you can’t buy what’s not for sale.

However, an unexpected affordability surge, driven primarily by lower-than-anticipated mortgage rates, rising wages and favorable demographics, has boosted housing demand.”

Mortgage interest rates had been on the rise for most of 2018 before reaching their peak in November at 4.94%. According to Freddie Mac’s Primary Mortgage Market Survey, interest rates last week came in at 4.20%.

Average hourly earnings grew at an annual rate of 3.2% in March, up substantially from the 2.3% average pace seen over the last 10 years.

These two factors contributed nearly $6,000 worth of additional house-buying power for median households from February to March 2019, according to First American’sresearch. Fleming is positive about the prolonged impact of lower rates and higher wages.

“We expect rising wages and lower mortgage rates to continue through the spring, boosting housing demand and spurring home sales.”

Bottom Line

Low mortgage interest rates have kept housing affordable throughout the country. If you plan on purchasing a home this year, act now while rates are still low!

Looking to Buy, Sell, or Invest? Contact:

David Demangos - Keller Williams Realty
Cell: 858.232.8410 | Realtor® BRE# 01905183
www.AwesomeSanDiegoRealEstate.com
Our Team Goes to Extremes to Fulfill Your Real Estate Dreams!

San Diego Real Estate Expert | Global Property Specialist
Certified Luxury Marketing Specialist | CLHMS Million Dollar Guild Agent
Green Specialist | Certified International Property Specialist
2016, 2017 & 2018 Recognition of Excellence Award Winner SDAR