Contact Us Now! Ask Us Anything
480-470-8505 Call Us Today

Dispelling the Myth About Home Affordability

Dated: 10/11/2018

Views: 19

We have all seen the headlines that report that buying a home is less affordable today than it was at any other time in the last ten years, and those headlines are accurate. But, have you ever wondered why the headlines don’t say the last 25 years, the last 20 years, or even the last 11 years?

The reason is that homes were less affordable 25, 20, or even 11 years ago than they are today.


Obviously, buying a home is more expensive now than during the ten years immediately following one of the worst housing crashes in American history.

Over the past decade, the market was flooded with distressed properties (foreclosures and short sales) that were selling at 10-50% discounts. There were so many distressed properties that the prices of non-distressed properties in the same neighborhoods were lowered and mortgage rates were kept low to help the economy.


Low Prices + Low Mortgage Rates = High Affordability

Prices have since recovered and mortgage rates have increased as the economy has gained strength. This has and will continue to impact housing affordability moving forward.

However, let’s give affordability some historical context. The National Association of Realtors (NAR) issues their Affordability Index each month. According to NAR:

“The Monthly Housing Affordability Index measures 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 monthly price and income data.”

NAR’s current index stands at 138.8. The index had been higher each of the last ten years, peaking at 197 in 2012 (the higher the index the more affordable houses are).

But, the average index between 1990 and 2007 was just 123 and there were no years with an index above 133. That means that homes are more affordable today than at any time during the eighteen years between 1990 and 2007.

Bottom Line

With home prices continuing to appreciate and mortgage rates increasing, home affordability will likely continue to slide. However, this does not mean that buying a house is not an attainable goal in most markets as it is less expensive today than during the eighteen-year stretch immediately preceding the housing bubble and crash.

Blog author image

Curtis Johnson

Curtis is a Best Selling Author, the Founder and CEO of The Curtis Johnson Team Powered By eXp Realty, where he runs a dynamic Real Estate Team having sold over almost 5,000 residential homes. The Wal....

Latest Blog Posts

What If I Wait One Year to Buy a Home?

National home prices have increased by 5.4% since this time last year. Over that same time period, interest rates have remained near historic lows which has allowed many buyers to enter

Read More

The Tale of Two Markets [INFOGRAPHIC]

Some Highlights:An emerging trend for some time now has been the difference between available inventory and demand in the premium and luxury markets and that in the starter and trade-up markets and

Read More

2008 vs. 2018: Are Owners Using Their Homes as ATMs Again?

Over the last six years, we have experienced strong price appreciation which has increased home equity levels dramatically. As the number of “cash-out” refinances begins to approach

Read More

A Look at Where Interest Rates Are Headed in 2019

The interest rate you pay on your home mortgage has a direct impact on your monthly payment. The higher the rate, the greater the payment will be. That is why it is important to know where rates are

Read More