After over a year of moderating home prices, it appears home value appreciation is about to speed up. Many renters and those living with family and friends are becoming first-time home buyers due to this. Skylar Olsen, Director of Economic Research at Zillow, explained in a recent article:
“A year ago, a combination of a government shutdown, stock market slump and mortgage rate spike caused a long-anticipated inventory rise. That supposed boom turned out to be a short-lived mirage as buyers came back into the market and more than erased the inventory gains. As a natural reaction, the recent slowdown in home values looks like it’s set to reverse back.”
CoreLogic, in their January 2020 Market Pulse Report, agrees with Olsen, projecting home value appreciation in all fifty states this year. Here’s the breakdown:
Many believe when real estate values are increasing, owning a home becomes less affordable. Let’s explain why this misconception isn’t necessarily true.
In more cases than not, homes are purchased with a mortgage. The current low mortgage rates are a major component of how much home you can afford. Mortgage rates have fallen by almost a full percentage point since this time last year.
Another major piece of the equation is a buyer’s income. The median family income has risen by 5% over the last year, contributing to the affordability factor.
Black Knight, in their latest Mortgage Monitor, addressed this exact issue:
“Despite the average home price increasing by nearly $13,000 from just over a year ago, the monthly mortgage payment required to buy that same home has actually dropped by 10% over that same span due to falling interest rates…
Put another way, prospective homebuyers can now purchase a $48K more expensive home than a year ago while still paying the same in principal and interest, a 16% increase in buying power.”
If you’re thinking about purchasing a home as a first-time home buyer, realize that homes are still affordable even though prices are increasing. Connect with us today to find out the best option for you. As the Black Knight report concluded, “Even with home price growth accelerating, today’s low-interest-rate environment has made home affordability the best it’s been since early 2018.”