Main Content

NOVA Real Estate Today More Affordable Than 1985-2000

Date: August 16, 2018 Posted by Joey Remondino Category: , ,

Rising home prices in Northern VA have some concerned that the average buyer will no longer be able to afford the average priced home.  However, it is not just the price of a home that determines its affordability. The monthly cost of a home is determined by the price and the interest rate on the mortgage used to purchase it.  This is why NOVA real estate today is more affordable than 1985-2000.

Mortgage interest rates currently stand at about 4.5%. The average annual mortgage interest rate from 1985 to 2000 was almost double that, at 8.92%. When comparing affordability of homeownership over the decades, we must also realize that incomes have increased.

This is why most indexes use the percentage of median income required to make monthly mortgage payments on a typical home as the point of comparison.

Zillow released a report comparing home affordability over the decades using this formula. They revealed that, though homes are less affordable this year than last year, they are more affordable today (17.1%) than they were between 1985-2000 (21%). Also, homes are more affordable now than at the peak of the housing bubble in 2006 (25.4%). Here is a chart of these findings:

 

What will happen when mortgage interest rates rise?

Most experts think that the mortgage interest rate will increase to about 5% by year’s end. How will that impact affordability? Zillow also covered this in their report:

Rates would need to approach 6% before homes became less affordable than they had been historically.

Bottom Line

Northern VA Homes are less affordable today than they were last year; However, they are still a great purchase while interest rates are well below the 6% mark.

Call Joey,  specializing in happy home sellers and home buyers, selling starter homes, trade up homes, premium homes, and luxury real estate in Northern VA. Selling homes since 2003 to first time home buyers, relocating clients, first time home sellers, luxury clientele, downsizing, and trade up clientele. Helping home sellers sell quickly and profit more with a carrier average days on market of 39 days.

Original article posted on Call Joey Keeping Current Matters blog here.

Contact Me Now:


Sorry we are experiencing system issues. Please try again.

 

Todays New Listings in Northern VA:


Sorry we are experiencing system issues. Please try again.