Are Houses Less Affordable Than They Were in Past Decades?
There are many headlines about how housing affordability is declining. The headlines are correct: it’s less affordable to purchase a home today than it was a year ago. However, it’s important to give this trend context. Is it less expensive to buy a house today than it was in 2005? What about 1995? What happens if we go all the way back to 1985? Or even 1975?
However, when we look at housing, price is just one component that makes up the monthly cost of the home. Another key factor is the mortgage rate at the time of purchase.
Let’s look back at the
cost of a home over the last five decades and adjust it for inflation by converting that cost to 2021 dollars. Here’s the methodology for each data point of the table below:
Mortgage Amount: Take the median sales price at the end of the second quarter of each year as reported by the Fed and assume that the buyer made a 10% down payment.
Mortgage Rate: Look at the monthly 30-year fixed rate for June of that year as reported by Freddie Mac.
P&I: Use a mortgage calculator to determine the monthly principal and interest on the loan.
In 2021 Dollars: Use an inflation calculator to determine what each payment would be when adjusted for inflation. Green means the homes were less expensive than today. Red means they were more expensive.
Last year: Prices saw strong appreciation over the last year and mortgage rates have remained relatively flat. Therefore, affordability weakened.
2010: Home values plummeted after the housing crash 15 years ago. One-third of all sales were distressed properties (foreclosures or short sales). They sold at major discounts and negatively impacted the value of surrounding homes – of course
homes were more affordable then.
At every other point, even in 1975, it was more expensive to buy a home than it is today.
Bottom Line
If you want to buy a home, don’t let the headlines about affordability discourage you. You can’t get the deal your friend got last year, but you will get a better deal than your parents did 20 years ago and your grandparents did 40 years ago.
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Things to do: Stillwater Lift Bridge Loop Opening Celebration
Join in a historic Community Celebration to mark the official opening of the Loop Trail – a newly constructed 4.7 loop trail system that connects the historic Lift Bridge with the St. Croix River Crossing Bridge. The event will kick off with an official Ribbon Cutting Ceremony at 10 a.m. with dignitaries from both the state of Minnesota and Wisconsin to celebrate the re-opening of the Lift Bridge and shared loop trail between two states, two historic bridges and the beautiful St. Croix River.
Other events include a Beer Garden, Lift/Loop Celebration Park Exhibits, Mascot Dance Off, Curio Dance Group, Zephyr/Phipps Theater performances, Broken Spoke Band, Tim Sigler Band and they day will be topped off with Fireworks!
Click HERE for more details and a complete schedule
Luxury Listing Of The Week
4 BD | 5 BA | 4,837 SqFt | $1,250,000
Investor Deal Of The Week
3 BD | 2 BA | 2,118 SqFt | $267,500
Courtesy of Century 21
TRENDS: Mixing Dining Chairs And Stools
are already two of the most important decisions when furnishing a home, but what if your kitchen and dining space are connected?
Before mainstream architecture and design started leaning towards open concept homes, the stool and the dining chair were often separated by rooms. Today, more and more people are opening up their homes, knocking down their walls, and designing to create a welcoming and social space, and we’re all about it. But what does it mean for stools and dining chairs?
Check out the the rest of this article HERE.
Market Update
VRBO RENTALS AVAILABLE
OCTOBER 1
To book Property 1, click here or enter Property ID 4853039 at VRBO.com
To book Property 2, click here or enter Property ID 7172963 at VRBO.com
