New Buyers Surprised by How Affordable Homes are

Dated: February 11 2021

Views: 12

47% of New Buyers Surprised by How Affordable Homes Are Today

47% of New Buyers Surprised by How Affordable Homes Are Today | MyKCM

Headlines matter. Right now, it’s hard to read about real estate without seeing a headline that suggests homes have become unaffordable for most Americans. In reality, there’s hard evidence that shows how owning a home is more affordable than renting in most parts of the country, as record-low interest rates are keeping monthly mortgage payments about 23% lower than the typical payment of 20 years ago. Despite the facts, misleading headlines persist, and they impact how hopeful homebuyers perceive the market.

In a recent survey by realtor.com, home shoppers indicated they were surprised by what they could actually afford when buying their first home. In fact, 47% discovered their budget was larger than they expected. George Ratiu, Senior Economist at realtor.com, explains:

"For first-time buyers, especially, the drop in the 30-year mortgage rate…has provided unexpected leverage. Lower rates allowed many buyers to stretch and buy more expensive homes while keeping their monthly budget the same."

So why do these negative headlines that cast doubt on affordability continue to exist?

Most analysts only look at two of the three elements that make up the affordability equation: price and income. It’s true that incomes haven’t kept up with the price of houses. However, affordability is about the cost of the home, not just the price. For that reason, mortgage rates, the third element of the affordability equation, are important to consider.

For example, here’s the typical mortgage payment for assorted dates going back to 2000, as calculated by CoreLogic:47% of New Buyers Surprised by How Affordable Homes Are Today | MyKCMOutside of the housing crash (when short sales and foreclosures drove prices down), it’s more affordable to buy a home today when you consider all three elements of the affordability equation: price, income, and mortgage rate.

Bottom Line

Whether you’re a first-time buyer or a move-up buyer, don’t let the headlines scare you away from your dream of homeownership. Instead, connect with mortgage and real estate professionals to determine what you can afford and what’s available at that price. Like almost half of the buyers in the survey, you may be pleasantly surprised.

Blog author image

Jason Shafor

Jason is a born and raised Flagstaff native. He has over 15 years of home building experience in Northern Arizona. Jason takes the same blue collar, hard working habits he developed and implements the....

Latest Blog Posts

There Is a Common Misconception That a 20% Down Payment Is Necessary To Purchase a Home.

Is a 20% Down Payment Really Necessary To Purchase a Home?There’s a common misconception that, as a homebuyer, you need to come up with 20% of the total sale price for your down payment.

Read More

Remote Work Is Here To Stay! Does Your Home Deliver the Space You Need?

Remote Work Is Here To Stay. Can Your Home Deliver the Space You Need?A lot has changed over the past year. For many people, the rise in remote work influenced what they’re looking for in a

Read More

Is It Now Time To Move to a New Home?

Is It Time To Move on to a New Home?If you’ve been in your home for longer than five years, you’re not alone. According to recent data from First American, homeowners are staying

Read More

Have You Ever Seen a Housing Market Quite Like This?

Have You Ever Seen a Housing Market Like This? [INFOGRAPHIC]Some HighlightsWhether you’re buying or selling – today’s housing market has plenty of good news to

Read More