{"id":1994,"date":"2021-08-26T15:19:28","date_gmt":"2021-08-26T15:19:28","guid":{"rendered":"https:\/\/phphouses.com\/blog\/?p=1994"},"modified":"2021-08-26T15:19:28","modified_gmt":"2021-08-26T15:19:28","slug":"housing-affordability-money-dont-forget","status":"publish","type":"post","link":"https:\/\/phphouses.com\/blog\/housing-affordability-money-dont-forget\/","title":{"rendered":"If Housing Affordability Is About the Money, Don\u2019t Forget This."},"content":{"rendered":"
\"\"

If Housing Affordability Is About the Money, Don\u2019t Forget This.<\/p><\/div>\n

There are many\u00a0non-financial benefits<\/a>\u00a0of buying your own home. However, today\u2019s headlines seem to be focusing primarily on the financial aspects of homeownership \u2013 specifically affordability. Many articles are making the claim that it\u2019s not affordable to buy a home in today\u2019s market, but that isn\u2019t the case.<\/p>\n

Today\u2019s buyers are spending approximately\u00a020% of their income<\/a>\u00a0on their monthly mortgage payments. According to\u00a0The Essential Guide to Creating a Homebuying Budget<\/a><\/em>\u00a0from\u00a0Freddie Mac<\/em>, the 20% of income that purchasers are currently paying is well within the 28% guideline suggested:<\/p>\n

\u201cMost lenders agree that\u00a0you should spend no more than 28% of your gross monthly income on a mortgage payment<\/strong>\u00a0(including principal, interest, taxes and insurance).\u201d<\/em><\/p><\/blockquote>\n

So why is there so much talk about challenges regarding affordability?<\/p>\n

It\u2019s Not That Homes Are Unaffordable \u2013 It\u2019s That They\u2019re Less Affordable.<\/strong><\/h4>\n

Since home prices are rising, it\u2019s true that homes are less affordable than they have been since the housing crash fifteen years ago. Headlines making these claims aren\u2019t incorrect; they just don\u2019t tell the whole story. To paint the full picture, you have to look at how today stacks up with historical data. A closer analysis of affordability going further back in time reveals that homes today are\u00a0more affordable<\/a>\u00a0than any time from 1975 to 2005.<\/p>\n

Despite that, the chatter about affordability is pushing some buyers to the sidelines. They don\u2019t feel comfortable knowing someone else got a better deal a year ago.<\/p>\n

However, Are Homes Really Less Affordable if We Consider Equity?<\/strong><\/h4>\n

In a\u00a0recent post<\/a>, Odeta Kushi, Deputy Chief Economist at\u00a0First American<\/em>, offers a different take on the financial components of housing affordability. Kushi proposes we should at least consider the impact equity build-up has on the affordability equation, stating:<\/p>\n

\u201cFor those trying to buy a home, rapid house price appreciation can be intimidating and makes the purchase more expensive. However, once the home is purchased, appreciation helps build equity in the home, and becomes a benefit rather than a cost.\u00a0When accounting for the appreciation benefit in our rent versus own analysis, it was cheaper to own in every one of the top 50 markets<\/strong>.\u201d<\/em><\/p><\/blockquote>\n

Let\u2019s look at an example. In the above-mentioned post, Kushi examines the rent versus buy situation in Dallas, Texas. Kushi chose Dallas because home prices there sit near the median of the top 50 markets in the nation.<\/p>\n

Kushi first calculates the monthly mortgage payment on a median-priced home with a 5% down payment and a mortgage rate of 3% (see chart below<\/em>):<\/p>\n

\"\"

Monthly Cost of Owning a Home in Dallas<\/p><\/div>\n

Kushi then takes the monthly cost and subtracts the appreciation the home had over the previous twelve months. The average house price in Dallas increased 17.5% in the second quarter of 2021 compared to last year (this is in line with the national pace). That equates to an equity benefit of approximately $3,550 each month if the pace remains the same (see chart below<\/em>):<\/p>\n

\"\"

Monthly Cost After Appreciation<\/p><\/div>\n

We can see the equity gained each month was greater than the monthly mortgage payment, resulting in a negative cost to own. The buyer could build their net worth by $1,830 each month \u2013\u00a0after paying their mortgage.<\/em><\/strong><\/p>\n

Kushi then compares the monthly cost of owning to the cost of renting (see chart below<\/em>):<\/p>\n

\"\"

Difference in Monthly Cost vs. Median Rent<\/p><\/div>\n

When adding equity build-up into the equation, the cost of renting is $3,140 more expensive than owning. Again, the\u00a0First American<\/em>\u00a0analysis shows that it\u2019s less expensive to own in each of the top 50 markets in the country when including the equity component.<\/p>\n

Bottom Line<\/strong><\/h3>\n

If you\u2019re on the fence about whether to buy or rent right now, let\u2019s connect so we can determine if the equity increase in our local market should impact your decision.<\/p>\n

Contact us:<\/strong>
\nPHP Houses
\n142 W Lakeview Ave
\nUnit 1030
\nLake Mary, FL 32746
\nPh:\u00a0(407) 519-0719<\/span>
\nFax:\u00a0(407) 205-1951<\/span>
\nemail:\u00a0info@phphouses.com<\/p>\n

Let\u2019s Connect:<\/strong>
\nFacebook<\/a>
\nLinkedin<\/a>
\nTwitter<\/a>
\nInstagram<\/a><\/p>\n

THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE OF ADVICE.<\/em><\/h5>\n","protected":false},"excerpt":{"rendered":"

There are many\u00a0non-financial benefits\u00a0of buying your own home. However, today\u2019s headlines seem to be focusing primarily on the financial aspects of homeownership \u2013 specifically affordability. So why is there so much talk about challenges regarding affordability? Finish Reading If Housing Affordability Is About the Money, Don\u2019t Forget This.<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[69],"tags":[82,59,240,110,18,130,203,83,25,49,217,42,23,40,393,367,63,20,12,48,239,47,19,6,17],"_links":{"self":[{"href":"https:\/\/phphouses.com\/blog\/wp-json\/wp\/v2\/posts\/1994"}],"collection":[{"href":"https:\/\/phphouses.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/phphouses.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/phphouses.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/phphouses.com\/blog\/wp-json\/wp\/v2\/comments?post=1994"}],"version-history":[{"count":1,"href":"https:\/\/phphouses.com\/blog\/wp-json\/wp\/v2\/posts\/1994\/revisions"}],"predecessor-version":[{"id":1999,"href":"https:\/\/phphouses.com\/blog\/wp-json\/wp\/v2\/posts\/1994\/revisions\/1999"}],"wp:attachment":[{"href":"https:\/\/phphouses.com\/blog\/wp-json\/wp\/v2\/media?parent=1994"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/phphouses.com\/blog\/wp-json\/wp\/v2\/categories?post=1994"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/phphouses.com\/blog\/wp-json\/wp\/v2\/tags?post=1994"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}