Affordable

Real estate prices are up, way up, from just a few years ago. I’m hearing people wonder if we are in another housing “bubble” that is about to pop. One of the key factors to track is how “affordable” houses are. One way to measure “affordability” is a function of household income, home prices and mortgage rates. With those three factors, you can figure out what the average monthly payment for the average household and then calculate what percentage that is of their monthly household income.

At the peak of the 2006 housing bubble, the median national home price was about $230K and mortgage rates were about 6.75%. With a 20% down payment, that works out to about $1,200 per month, which was about 30% of the monthly household income at that time.

The median national home price right now stands at a little over $350K, which is 52% more than the peak of 2006. However, household income is also up and mortgage rates are down. So even though home prices are way up, the mortgage payment for the median home is actually LOWER than 2006 as a percentage of income. It’s at about 21%. So one could argue that homes are actually more “affordable” right now than in 2006 on a national basis.

Mortgage rates haven risen recently, but we are a long way from the 6-7% rates we saw in the past. And while our local real estate prices are much higher than the national numbers given above, our median income is also much higher. I’m not saying that our prices can’t or won’t fall. But when you look at the numbers behind affordability right now, they aren’t as scary as you would think.

If you have questions about real estate, call me at (925) 240-MOVE (6683). Voted “Best of Brentwood” multiple times. To search the MLS for free, go to: www.SharpHomesOnline.com. Sharp Realty. #01245186

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