It seems like everyone’s talking about affordability and making an assumption that homes are less affordable than they have ever been. Not so fast…
Let’s look at home prices relative to the median income needed to purchase the home.
It’s true that home prices have appreciated year-over-year for the last 76 months in a row, largely driven by high demand and low supply.
According to a recent study by Zillow, the percentage of median income necessary to buy a home in today’s market (17.1%) is well below the mark reached in 1985 – 2000 (21%), as well as the mark reached in 2006 (25.4)!
Bottom line, interest rates would have to increase to 6% before buying a home would be less affordable than historical norms.
Source: Keeping Current Matters