If moving up to a larger home or into a different area that better suits your family’s needs is on the horizon for you, there’s good news: Moving up is more affordable than it’s been in the last 40 years, according to a recent study.
Recently, Trulia researched home affordability from 1975 through 2016 and found that “Nationally, homes are just about the most affordable they’ve been in the last 40 years… the median household could afford a home 1.5 times more expensive than the median home price. In 1980, the median household could only afford about 3/4 of the median home price.
The report also concluded that Despite relatively stagnant incomes, affordability has grown due to the sharp drop in mortgage rates over the last 30 years – from a high of over 16% in the 1980s to under 4% by 2016.
Of the nation’s 100 largest metros, only Miami became unaffordable between 1990 and 2016. Meanwhile, 22 metros have flipped from being unaffordable to becoming affordable in that same time frame.
Here is a graph showing the Affordability Index compared to the 40-year average:
The graph shows that housing affordability is better now than at any other time in the last forty years, except during the housing crash last decade.
Remember that during the recession, people were able to purchase foreclosures and short sales at 20-50% discounts.
There is no doubt that with home prices and mortgage rates on the rise, the affordability index will continue to fall. That is why if you are thinking of moving up, you probably shouldn’t wait. The expected rise in mortgage interest rates is another reason to move up now rather than waiting. As prices and interest rates go up together, your monthly housing cost could be doubly impacted.
If you have held off on moving up to your family’s dream home because you were hoping to time the market, that time has come.