Homes are now very affordable and demand is up, and I’m explaining why.
Why is there currently so much demand from buyers?
There’s a great book written by our Keller Williams founder, Gary Keller, called “Shift,” and in it, he says “Affordability drives the real estate industry. In fact, you might even say that affordability is the real estate industry. Buyers must be able to buy in order for sellers to be able to sell. As simplistic as this sounds, it’s equally that important. Affordability is the juice that makes the market go or stop. When it’s up, the market goes up. When it’s down, the market goes down. If you want to know where the market is headed just check how affordable a house is. There’s your thermometer and it’s extremely accurate.”
In the last year or two, we already had low interest rates, but now they’ve decreased to almost 2.5%. Affordability is higher than it has been in the last few years.
“Buyers must be able to buy for sellers to be able to sell.”
To demonstrate, let’s take a look at what a mortgage payment for a $300,000 loan was in the last few decades:
Decade | Average interest rate | Monthly payment
1970s | 8.86% | $2,384
1980s | 12.7% | $3,248
1990s | 8.12% | $2,267
2000s | 6.29% | $1,855
2010s | 4.09% | $1,448
Today | ~3% | $1,270
With these numbers, you can see how interest rates play into affordability. Black Knight Inc., a company that provides data on the mortgage industry, reports that despite home prices rising 97 months in a row, affordability is the highest it’s been since 2016. For the same payment, buyers can now afford almost $32,000 more in a house than they could a year ago. Most buyers look at what their monthly payment will be to see what they can afford.
All this leads me to say that now is a great time to buy a home.
If you’re considering buying a house, I would love to speak with you about your specific situation, so reach out to me. If you have any questions about real estate, call me at (619) 857-7203 or email me. I look forward to our next conversation.
