June 18, 2019.
Lately, headlines have circulated that say it’s less affordable to own a home today than at any other time in the past 10 years. These headlines are accurate, but they’re not in context. They’re also holding too many buyers back from what’s considered a major milestone in the American Dream.
Here’s what’s keeping 75% of renters stuck in the rent cycle
The housing market crashed in 2008, causing home values to drop by up to 60 percent in some markets. This devaluation played a big part in the Great Recession to come, from 2008 to 2010. To help re-stimulate the economy, mortgage rates dropped to new, never-before-seen lows.
This is why it’s been easy to buy a house at a deeply discounted price over the past 10 years. It’s also been easy to get a mortgage at a historically low rate.
Affordability was booming.
But, as home values return to healthy levels, and mortgage rates rise from their dramatic lows, it’s not as affordable to own a house as it was within this decade.
What the media is not reporting is this. It’s still more affordable to own a house today compared to any other time period since 1985. (This is when housing market data first started being collected.)
When you remove the post-crash years from the equation, housing affordability today is better than ever, beating almost any time in our country’s history.
Many headlines discussing affordability haven’t reported the full picture, leading many renters to believe they can’t afford to buy.
Here’s a great example: Freddie Mac’s latest Profile of Today’s Renter showed that almost all renters – 75 percent – think it’s more affordable to rent than to own a home. This is the highest percentage ever reported. But thankfully, this belief is a myth. Multiple studies prove that when you’re buying in today’s housing market, it costs less to own than to rent in the U.S.
“Professional, dedicated, personable, and invested. Bobby Thompson and his Cornerstone team (LOVE Drew!) helped pull off a miracle to get me into my first home.” – Click here to find a Cornerstone loan officer near you.
Slowly, the message is getting out. More news outlets are starting to accurately report on affordability. In their 2019 Housing Forecast, the National Association of Realtors said:
“While the U.S. is experiencing historically normal levels of affordability, potential buyers may be staying out of the market because of perceived problems with affordability.”
As a renter, you may be spending a larger portion of your monthly income on rent than you need to. Buying a house can give you the chance to take on a mortgage with the same or lower monthly payment that goes toward building your net worth and home equity.
Think you can’t afford it? Think again
Today’s housing market is filled with opportunities. Renters are starting to take advantage. Because of historic affordability, many first-time buyers are happy to hear they have much more buying power than they anticipated. If you’re wondering how much house you can afford (and how this stacks up to your monthly rent), you can find out now. Download LoanFly, input your info to get prequalified, and start searching for new homes in minutes.
For educational purposes only. Please contact your qualified professional for specific guidance.
Sources deemed reliable but not guaranteed.