Buying a home is more affordable now than 20 years ago
Favorable home prices and interest rates are giving homebuyers more affordable opportunities today, but things may not stay that way for long.
Even though the monthly payment needed to buy a median-priced home in the US has risen $100 over the past year, it still represents a smaller portion of the median income than houses on the market two decades ago.
Black Knight’s Mortgage Monitor Report on data collected through September found mortgage payments consume just 21.4% of American’s incomes. That’s down from July’s multi-year peak of 21.8% and well below the 24.2% average of the late 1990s and 26.2% in the early 2000s, before home prices climbed to bubble levels.
This window of current home affordability isn’t limited to a few geographic pockets scattered across the nation; the trend is widespread. Black Knight noted that mortgage-payment-to-income averages are below their 20-year benchmarks in every state except California, Hawaii, Oregon and DC.
“In looking at the affordability landscape across the country, we certainly see varying levels of affordability in each market compared to their own long-term benchmarks,” Black Knight executive vice president of data and analytics Ben Graboske said.
“But, by and large, the overall theme is that affordability in most areas, while tightening, remains favorable to long-term norms.”
The tightening of home affordability that Graboske mentions is predicated primarily on two ongoing economic trends. If home prices continue to rise at the current and very healthy rate of 6.2% and an anticipated rebound in long-term interest rates materializes over the coming months, housing affordability could soon break back above that 20-year-old trend line.
In its most conservative estimate, Black Knight predicts that this affordability window could close by this time next year.
To take advantage of the most affordable time in decades for buying a home, check out our guide to mortgages and compare rates to find the home loan that best fits your financial situation.