The past few months have seen a surplus of buyers and not enough homes to buy. Recently, however, the rising rate of home buyers seems to be slowing. This is due, at least in part, to the falling affordability of housing. Knowing what’s happening and how that affects your approach to home sales is a great way to stay on top of the ever changing market.
The quarterly numbers for 2013 are in and analyzed. First quarter, 73.7% of homes sold were affordable to families earning the US median income of $64,400 annually. Second quarter saw a drop in that affordability to 69.3%. Not only is this a drop of more than 4% of all the inventory on the market, it is the first time in almost five years that the affordability has fallen below 70%.
While this is certainly a significant drop in affordability, it is not reason to panic. During the recession, home prices were incredibly low and mortgage rates were very favorable to buyers. These two factors combined to make housing affordability reach record highs. The current lowering of affordability may be nothing more than the market beginning to resume its natural state.
One other source of this declining affordability is the increased demand for new homes. As buyers request more and more new homes, builders are competing for materials. Naturally, the cost of new homes is increasing, also making it harder to afford a home.
Experts are saying that this decline in affordability indicates a strengthening market. As home values increase, they become harder to afford, and those values have certainly been increasing. The median price of the homes sold in the second quarter of 2012 was $185,000. In the second quarter of 2013, the median price was $202,000.
As a real estate professional, you can take advantage of this decline of affordability by encouraging your potential buyers to take advantage of the still low mortgage rates before rates and home prices further increase, making what may now be affordable, no longer affordable. Check out our great “Right Timing” and “Have Buyers/Low Inventory”postcard series. http://www.corefact.com/print/catalog/220-have-buyers-low-inv/products
Because market conditions fluctuate so much from region to region, home affordability in your market area may differ from the country at large. Combining your market knowledge with the general country help you to counsel your clients to the best possible decision for their family.