Dennis Norman
If there is a silver lining to the lousy real estate market we’ve witnessed over the past 3 years, maybe this is it….housing affordability!
According to the Beacon Economics Home Affordability Index, homes selling in August were at their most affordable level sinde data became available over 40 years ago (1969). The Beacon Index, quite similar to the National Association of REALTORS housing affordability index, takes into account the percentage of income an average family would need to make mortgage payments on an average home.
The August estimate shows the cost of home ownership (mortgage interest plus principal payments after a 20% down payment) falling to 16.9% from 17.1% in July. Overall, the Beacon Economics Home Affordability Index has remained below 20% for the past twenty-one months.
“Home affordability has reached an historic high,” says Beacon Economics Founding Principal Christopher Thornberg. “Nationwide, prices are down approximately 25% from their peak, and mortgage financing rates are at all-time lows.” Moreover, the high level of affordability is likely to drive demand and reduce the stock of excess inventory, ultimately resulting in the need for new housing, a rise in prices, and a pickup in new construction, according to Thornberg.
“While prices may fluctuate modestly over the next several months, we believe the worst of the housing crisis is behind us,” adds Beacon Economics Research Manager Jordan G. Levine. “We expect prices to stabilize around current levels and likely be higher in the next twelve months.”
Thornberg agrees. “Although there could be some modest volatility over the next several months, our research indicates the housing market is at or near the bottom,” he says.
Source: Beacon Economics
Source: Beacon Economics
Leave a Reply
You must be logged in to post a comment.