Important Distinction
Homes are less affordable, Not Unaffordable!
It’s impossible to research the subject of buying a home without coming across a headline declaring that the fall in home affordability is a crisis. However, when we add context to the most recent affordability statistics, we soon realize the, though homes are less affordable than they have been over the last few years, they are more affordable than they historically have been.
A premier provider of data and analytics for the mortgage industry, just released their latest tMonthly Mortgage Monitor. Here’s what the report reveals:
“The monthly payment required to purchase the average priced home with a 20% down 30 year fixed rate mortgage increased by nearly 20% over the first nine months of 2021. It now requires 21.6% of the median household income to make the monthly mortgage payment.
Basically, the report shows that homes are less affordable today than at any other time in the last 3 years. However, in a previous report earlier this year, Black Knight calculated that the percentage of the median household income to make the monthly mortgage payment on the average home purchase over the last 25 years was 23.6%.
Today’s payment to income ratio is more affordable than the average over the last 25 years. Given that context, we can see that American households still have the same ability to be homeowners as their parents did 20 years ago.
Bottom Line
It’s true that it’s less affordable to buy ahome today than it has been the last few years. However, it’s more affordable to buy today than the average over the last 25 years. In other words, homes are less affordable, but they are not unaffordable. That’s an important distinction.