Home Buying: The Current Affordability Argument

Housing Affordability MeterIf you know me, or have worked with me as a client you know that I do not take affordability in housing lightly, and I do not believe that the market really determines affordability on an individual level. More than anything housing affordability is relative to ones own personal and/or household circumstance. Clearly this topic is not that simple, so I’ll stop there before this blog turns into an article.

That said, the markets are telling us that we are sitting within an incredible home buying opportunity. Well, to be more precise, two primary factors are telling us this is so; home prices, and interest rates. Together these create what is sometimes called the V principle. For the sake of this argument one has to ignore everything else, ie, job market, stock/mutual fund performance, personal qualification criteria etc… Taken in this isolated view in todays market the “V principle” does seem to represent an actual opportunity for those who can bring a stable and secure situation within the previously mentioned ignored criteria.

As the graphic here illustrates the V represents home prices, and mortgage interest rates respectively. Typically one of these numbers will be high in the market and the other low. For over two years now we have been experiencing a housing market anomaly where both prices and interest rates have remained low. This combination of low prices and interest rates create this so called affordability sweet spot.

If you believe home ownership is for you, and you are in a financial position to take on a mortgage and home maintenance, then this does seem to represent and ideal time for you to capitalize upon.

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