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, impacting how hopeful homebuyers perceive the market.
In a recent suvey by realtor.com, home shoppers indicated they were surprised by what they could actually afford when buying their first home. Actually, 47% discovered their budget was much larger than they expected. George Ratiu, Senior Economist at realtor.com, says this:
“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 entirely address affordability: 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 affordability, are very important to consider.
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.
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 surveys, you may be pleasantly surprised!