There’s a lot of confusion in the market, let us alleviate some of the pressures that you are feeling… Let me tell you what’s taking place in the market right now.
Is the current pace of home sales sustainable?
If we’re going to look at the three years right before, 2000, 2001, 2002, they are very reflective of what’s taking place in 2014, 2015, and today.
So, are we heading toward another real uptick, and then we’re going to come crashing down again? If we go all the way back to 1990 is that, from 1990 to 1999, home sales increased every single year outside of 1991. Every single year they either remained the same or they got bigger, got higher.
Why did that happen? populations increase. The desire for homeownership is part of the American Dream. It’s always been there. We’re not going to back to that seven million sales immediately that we had in 2005. But, we will slowly increase as time goes on.
Is there a challenge with affordability in the current real estate market?
The housing affordability index, according to the NAR, measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national level based on the most recent price and income data.
Basically, a value of one hundred means a family earning a median income earns enough to qualify for a mortgage on a medium priced home at the time. Anything about one hundred in the index means that a family has more than enough money to qualify. The higher the score, the easier it is. So, when people are talking about home affordability is down right now, they’re right. It is if we compare it from 2009 to 2015. But, we have to remember that, in 2009, ‘10, and ‘11, and ‘12, in each of those years, what we were faced with. We were faced with a whole bunch of distress sales foreclosures and short sales, which were sold at a major discount, in some marketplaces, as much as 50‐60% discount. So, of course, housing affordability was way low then, meaning the number would be way high, that it took to take to afford a typical home back then was less than it is today.
Housing affordability index is shrinking because prices are coming back. But, if we don’t look at it compared to those challenging years, if we go all the way back to 1990, we can see that today’s affordability index is higher in number. It’s much higher. So, as compared to the last couple of years where we had majorly discounted prices, it’s not as good. But, if we look back to the twenty years before that, we’re just fine. The higher the index, the easier it is to buy a house. And as what the numbers show, we are now going up – exactly where we should be.