How affordable is housing right now?

How affordable is housing right now?

You might be asking that question if you or someone you know is looking to buy a home. Let’s go take a look at the data and the actual numbers so we can see what your payment is and if housing is more or less affordable right now, especially in the Denver area. Let’s go into the secret home buying lab and take a look at the numbers.

All right, we’re here in the secret lab, actually my secret lab is a Starbucks, I apologize ahead of time if there’s any background noise here, but I just wanted to show you this example of the affordability right now in the market, it’s actually, even though home prices have been going up the affordability factor is strong right now.

I want to show you a Denver example of a home at $500,000 and how it compares to a year ago. Here we have from March 2019 we were squarely in the 4%, the lower fours at that time, and now here we are a year later with rates in the low threes. I’m just going to compare 4.25% to 3.25% and then I’m going to do another example of a higher priced home at $560,000 here. What this is, and this is an analysis that I can send you on your specific scenario, but this is a seven year projection, I can toggle this here to different number of years, but we’re going to do seven for this example, you’ll see here that the loan amount, first of all for the $560,000 home is higher, we’re assuming 20% down on each of these.

In March 2019 a $500,000 home with 20% down would have had a payment of $2327, today that same home would have a payment of $2100, if you think about that from the affordability factor, that means that you can buy a home for $560,000 with 20% down, with actually a little bit lower payment than the same $500,000 home a year ago.

Let’s just do a quick calculation, let’s say that in the neighborhood you’re looking homes went up by 7% in that neighborhood over the last year, which is not unusual in today’s market, there’s areas that have been more, some that are less, but a lot of Denver, 7% is pretty reasonable. That means the same house a year ago that was $500,000, might be going for $535,000 now, that means actually you would have a lower payment on that home now than you would have a year ago. That just speaks to the affordability of housing right now. Even though home prices are high and it’s been going up, which can be daunting if you’re out there looking, this just shows that you’re buying power as a buyer out there right now is a lot more.

I got a few more things on this analysis that we can look at is the difference in the cost, but that doesn’t apply to this specific example. We can see here total paid over the course of seven years, the lowest cost over seven years, and you’ll see here that the lowest cost is obviously the lower interest rate option. Then if we go down here, you’ll see what your loan balance would be at after seven years, and that ends the report. Just a lot of really good analysis, and as we’re looking at different loan options, different homes and that sort of thing, we can break this down for you based on today’s rates to really make an analysis of what the best financial move is.

Let me know if you have any questions on that or what the market’s doing. It’s again, an extremely hot market, the inventory is tight, if you’re out looking in Denver you know what I’m talking about. But if you’re with a skilled realtor you can find a house, and with the support of a lender who does things like calling the listing agent and doing a good job on your preapproval to make sure that it’s done correctly, it can go a long way towards getting your offer accepted.

As always feel free to call at 303-670-0137 or email at baxterteam@fairwaymc.com