housing market cloud. Historically, in the US, the average cost to own a home has been about 22.1% of an average family's income. It peaked in the 1980s at 36%. Today it is around 12.9% due to a combination of lower home prices and record low interest rates. What's interesting is that in 1989 when the average home cost $94,000, the principal and interest payment on that home was approximately $825. Interest rates were at 10%. In 2011 the average price of a home was $166,100 and the payment was only $837 because of the record low interest rate of 4.45%. Today in early 2012, rates are actually lower that 4.45% making that home even more affordable. However this will not last indefinitely. Many experts believe that both home prices and interest rates are at the bottom and have nowhere to go but up. An increase of 1% in interest rates is equivalent to a 10% increase in housing prices and a 1% rise in interest rates is far more likely than a 10% increase in home prices. In other words, housing affordability is about as good as it is likely to get. Saturday, February 18, 2012
Affordable Housing.
At the 2012 Keller Williams Family Reunion, Gary Keller, CEO of Keller Williams Realty International in his 2012 Vision Speech talked about how this is an historic time in the US real estate market. This isn't surprising news to those of us in the real estate industry, but it bears repeating since it is so striking. It has to do with housing affordability, which is at its lowest point since this statistic has been tracked. Think of this as a silver lining in the
housing market cloud. Historically, in the US, the average cost to own a home has been about 22.1% of an average family's income. It peaked in the 1980s at 36%. Today it is around 12.9% due to a combination of lower home prices and record low interest rates. What's interesting is that in 1989 when the average home cost $94,000, the principal and interest payment on that home was approximately $825. Interest rates were at 10%. In 2011 the average price of a home was $166,100 and the payment was only $837 because of the record low interest rate of 4.45%. Today in early 2012, rates are actually lower that 4.45% making that home even more affordable. However this will not last indefinitely. Many experts believe that both home prices and interest rates are at the bottom and have nowhere to go but up. An increase of 1% in interest rates is equivalent to a 10% increase in housing prices and a 1% rise in interest rates is far more likely than a 10% increase in home prices. In other words, housing affordability is about as good as it is likely to get.
housing market cloud. Historically, in the US, the average cost to own a home has been about 22.1% of an average family's income. It peaked in the 1980s at 36%. Today it is around 12.9% due to a combination of lower home prices and record low interest rates. What's interesting is that in 1989 when the average home cost $94,000, the principal and interest payment on that home was approximately $825. Interest rates were at 10%. In 2011 the average price of a home was $166,100 and the payment was only $837 because of the record low interest rate of 4.45%. Today in early 2012, rates are actually lower that 4.45% making that home even more affordable. However this will not last indefinitely. Many experts believe that both home prices and interest rates are at the bottom and have nowhere to go but up. An increase of 1% in interest rates is equivalent to a 10% increase in housing prices and a 1% rise in interest rates is far more likely than a 10% increase in home prices. In other words, housing affordability is about as good as it is likely to get. 
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