Housing affordability is a combination of prices and interest rates. There are several scenarios that can play out as those two metrics change. They are:
1. Prices rise, interest rates rise = affordability falls (homes less affordable)
2. Prices rise, interest rates fall = affordability outcome uncertain
3. Prices fall, interest rates rise = affordability outcome uncertain
4. Prices fall, interest rates fall = affordability increases (homes more affordable)
I have bolded #4 because it is the situation in which we find ourselves. And really, it is a historically unprecedented situation.
During the last real estate bust in the late '80s, prices fell sharply but interest rates were near historic highs (18%+). During our most recent real estate boom, even though interest rates were relatively low historically (6-8%), prices rose dramatically and made homeownership impossible for many people.
However, prices and interest rates are now at a level where homeownership is a wonderful investment - both long term (because prices will go back up) and short term (because owning is now cheaper than renting). NAR chief economist Lawrence Yun said recently that homeownership is more affordable than it has been in a generation.
And in their 2nd quarter report, Republic Mortgage Insurance Company said:
"Home prices are low relative to equivalent rents in Tallahassee. Currently, monthly mortgage payments (principal + interest) based on the average priced property are 30.2% less than comparable rents in this area. Historically average monthly payments (principal + interest) are 19.3% more than comparable rents in Tallahassee."
So if you are interested in buying a new home (or building wealth in real estate by acquiring rental property), give me a call! 850-251-6643.
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