Is Housing Unaffordable?
As home values rocket upwards, affordability weakens, yet homes are still not too far out of reach for most buyers because of low mortgage rates.
In 1980, a new car cost around $7,200 and a gallon of gas was $1.19. It was $2.25 for a movie ticket, 15 cents for a firstclass stamp, 91 cents for a dozen eggs, and $2.16 for a gallon of milk. Wow! It was cheap living back in 1980. Reminiscing and longing for the good ol’ days leaves out a very important, often overlooked difference, income. The Orange County median household income in 1980 was $22,000, a drop in the bucket compared to today’s $100,000 level.
It boils down to perspective. Looking only at housing prices tells only part of the story. It is important to also consider household incomes and the prevailing mortgage rates. Naysayers are quick to point out how the median sales price was much lower back in prior years; however, taking into consideration both the median income and the average 30-year mortgage rate illustrates how buyers can afford so much more today. The historically low mortgage rate environment has stoked today’s unsatiable demand and has allowed housing to soar over the past year.
Excerpt taken from an article by Steven Thomas.