Do Price Increases Impact Affordability
For well over the last year we have witnessed moderation in home prices. If the process is not begun already there is at least a strong indication that home value appreciation is about ready to re accelerate.
Zillow's Director of Economic Research, Skylar Olsen echoes the claim. He states, "A year ago, a combination of a government shutdown, stock market slump and mortgage rate spike caused a long-anticipated inventory rise. That supposed boom turned out to be a short-lived mirage as buyers came back into the market and more than erased the inventory gains. As a natural reaction, the recent slowdown in home values looks like it is set to reverse back.”
CoreLogic, in their January 2020 Market Pulse Report, agrees with Olsen, projecting home value appreciation in all fifty states this year. Here’s the breakdown:
- 21 states appreciating 5% or more
- 26 states appreciating between 3-5%
- Only 3 states appreciating less than 3%
Home Ownership and Affordability
Many believe when real estate values are increasing, owning a home becomes less affordable. That misconception is not necessarily true.
In most cases, homes are purchased with a mortgage. The current mortgage rate is a major component of the affordability equation. Mortgage rates have fallen by almost a full percentage point since this time last year.
Another major piece of the equation is a buyer’s income. The median family income has risen by 5% over the last year, contributing to the affordability factor.
Black Knight, in their latest Mortgage Monitor, addressed this exact issue:
“Despite the average home price increasing by nearly $13,000 from just over a year ago, the monthly mortgage payment required to buy that same home has actually dropped by 10% over that same span due to falling interest rate..."
Put another way, Black Knight goes on to say, "[H]omebuyers can now purchase a $48K more expensive home than a year ago while still paying the same in principal and interest, a 16% increase in buying power. Even with home price growth accelerating, today’s low-interest-rate environment has made home affordability the best it’s been since early 2018."
If you are considering the purchasing a home anywhere, including Grays Harbor, understand that home ownership can still be a wise and affordable option even in an environment of increasing prices.
Are you interested in talking with Jessica or any of our other friendly team about how ownership could benefit you? You could be very surprised by the current value have your home any equity you have accrued. Why not give your Oly Pen Real Estate Team a call today at 360.249.8187 or stop by our office 141 S. Main Street in friendly Montesano, WA and discuss your expectations today!