Housing affordability can be best described as housing deemed affordable to individuals with a household income at or below the national level. Usually, housing is deemed affordable if those individuals who meet or run below the national average income can purchase a home. However, during the fall of 2020, we saw a massive increase in home costs. In this case, home prices were rising faster than incomes, which put some financial stress on many families in America. This also accounts for renters as well. In 2020-2021, the majority of renters spent more than half of their income on rent. Knowing this, why is rent continuously rising? When will home prices decrease? Will we eventually even out?
Well, the easy answer is yes! For the second month in a row, the national housing affordability improved, according to the latest National Association of Realtors housing affordability index report. Many Americans were worried that home prices would continuously increase, but buyers are starting to get reluctant to pay such high prices for a home. For the majority of the millennial generation, purchasing a home is out of the question. Home prices hit the roof, and these are prices that cannot break even with current national income. The average household income is set at nearly $80,000, which can get you a home for roughly $300,000. In the current market, a $300,000 home is averaged as a single-family home, nearly 1,500 sq/ft in Cookeville, Tennessee. Before the pandemic, $300K could have bought you a multi-family home, roughly 2,500 - 3,500 sq/ft.
Cookeville, alone, could not support a housing market that remained so high. Just think, If a household income of $80K can buy you a home for $300K, what do you think $38,256 can afford? Cookeville’s average household income is nearly $40K, which does not support the average home price of $256K. So, putting it into perspective, Cookeville’s housing market should come down eventually. So, if you are not currently in a position to purchase a home, be patient as these prices continue to drop.
In August, monthly mortgage payments dropped by 1.1% while median family income fell by 0.7%, and the 30-year fixed mortgage rate was 2.89% compared to 3% a year prior. Median existing home sales prices jumped by 15.6%. Contributing to the increase in affordability are low mortgage rates, which have fallen back-to-back months. Despite rising to 151.3 in August from a low 146.5 in June, the housing affordability index is well below its August 2020 level of 165.8. Yes, we see this as a major improvement compared to the previous year, but we are still yet to reach the finish line. Homes are expected to continue to drop well into 2022. So, for those of you who cannot afford a home of your own, be patient as 2022 may be the year for you to move!
Post a Comment