{"id":1307,"date":"2020-12-02T16:09:56","date_gmt":"2020-12-02T16:09:56","guid":{"rendered":"https:\/\/phphouses.com\/blog\/?p=1307"},"modified":"2020-12-02T16:09:56","modified_gmt":"2020-12-02T16:09:56","slug":"home-values-surging-still-affordable-buy-right-now","status":"publish","type":"post","link":"https:\/\/phphouses.com\/blog\/home-values-surging-still-affordable-buy-right-now\/","title":{"rendered":"With Home Values Surging, Is it Still Affordable to Buy Right Now?"},"content":{"rendered":"
\"\"

With Home Values Surging, Is it Still Affordable to Buy Right Now?<\/p><\/div>\n

Housing inventory is at an all-time low.\u00a0Realtor.com<\/em>\u00a0just\u00a0reported<\/a>\u00a0that there are\u00a039% fewer homes for sale today<\/strong>\u00a0than there were last year. At the same time, buyer demand remains strong. In a recent newsletter, research analyst Ivy Zelman explained:<\/p>\n

\u201cAlthough the headwind of severe supply constraints in most markets has contributed to slight moderation in seasonally-adjusted and year-over-year new pending contract growth for two consecutive months (albeit still growing strongly),\u00a0the underlying strength of buyer demand<\/strong>,\u00a0particularly for this time of year, remains apparent.\u201d<\/strong><\/em><\/p><\/blockquote>\n

Whenever there\u2019s a shortage in the supply of an item that\u2019s in high demand, the price of that item increases. That\u2019s exactly what\u2019s happening in the real estate market right now. As a result, home values are surging.<\/p>\n

This is great news if you\u2019re planning to sell your house. On the other hand, as either a first-time or repeat buyer, this may instead seem like troubling news. Purchasers, however, should realize that the price of a house is not as important as the\u00a0monthly cost<\/a>. Here\u2019s how it breaks down.<\/p>\n

There are several factors that influence the cost of a home. Two of the major ones are:<\/p>\n

    \n
  1. The price of the home<\/li>\n
  2. The mortgage rate at which a buyer can borrow the funds necessary to purchase the home<\/li>\n<\/ol>\n

    How do these factors impact affordability?<\/strong><\/h4>\n

    The\u00a0National Association of Realtors<\/em>\u00a0(NAR) produces a\u00a0Housing Affordability Index<\/a>\u00a0which takes these factors into account and determines an overall affordability score for housing. According to NAR, the index:<\/p>\n

    \u201c\u2026measures 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.\u201d<\/em><\/p><\/blockquote>\n

    Their methodology states:<\/p>\n

    \u201cTo 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.\u201d<\/em><\/p><\/blockquote>\n

    So, the higher the index, the more affordable it is to purchase a home. Here\u2019s a graph of the index going back to 1990:<\/p>\n

    \"\"

    Housing Affordability Index 1990 to Today<\/p><\/div>\n

    The blue bar represents today\u2019s affordability. We can see that homes are more affordable now than they were from:<\/p>\n