Affordability, are homes affordable today?  What are the components to home affordability?  Is buying power the same as home affordability?  OH MY, so many questions!  In this special episode of the Martini Mortgage Podcast, Certified Mortgage Advisor Kevin Martini answers these questions and unpack home affordability today. 

What is home affordability?

Home affordability is a measure of whether someone earns enough to qualify for a loan on a typical home based on the most recent price, mortgage rate and wage data.

…I want to share this with you.  Remember, when you think affordability there are many factors to consider such as home prices, mortgage rates and income.  Yup, when home prices rise and home loan rates rise, it does impact affordability, and experts project both of those things will climb in the months and years ahead. Simply put, that is why it’s less affordable to buy a home than it was over the past two years when prices and rates were lower than they are today. Keep top of mind that wages need to be factored into affordability as well. It is a fact that wages have been rising, and higher wages is a big reason along with historic low rates that, while homes are slightly less affordable, homes are not unaffordable today.

Raleigh Mortgage Broker and Certified Mortgage Advisor, Kevin Martini

It seems like today that whenever you hear the word real estate, you will also hear the word affordability. Right now, from a historical perspective, homes are still affordable. Granted, in spring 2021 homes were more affordable than they are right now in spring 2022. It is important to share, less affordable does not mean unaffordable.

My name is Kevin Martini and I am not just the host of the Martini Mortgage Podcast, I am also a Certified Mortgage Advisor with the Martini Mortgage Group which is located in Raleigh, North Carolina however I help families all over the great state of North Carolina and many other states too.  Welcome to episode 134 of the Martini Mortgage Podcast where I am going to unpack home affordability today. 

Let me share the Kevin Martini definition of home affordability.  Home affordability is a measure of whether someone earns enough to qualify for a loan on a typical home based on the most recent price, mortgage rate and wage data.  Buying power is sometimes confused with home affordability and it should not be. Sure thing, when mortgage rates rise, it will impact how much home you can afford but higher mortgage rates is not the only thing that impacts home affordability.

One of the three components of home affordability is home prices. An industry leader is CoreLogic and they are a trusted resource of real estate data.  In their most recent U.S. Home Price Insights Report they highlight that home values increased 19.1% from January 2021 to January 2022.  If you compare month-over-month data, home prices increased 1.4% in January 2022 over December 2021.This increase in home value has impacted home affordability but again, home are less affordability based on this metric, they are not unaffordable. Here is the good news, there is forecasted to be a deceleration of home values by CoreLogic. 

Please don’t freak out with the word deceleration.  In the simplest form, it just means homes are still going to appreciate, they are just not going to appreciate at the level they have.  Make sense?

Oh by the way, real estate is hyper local and that data from CoreLogic is national data not local data about say Raleigh, North Carolina.  Some markets like Raleigh, North Carolina are like to exceed national numbers.

Let me shift gears to talk about mortgage rates.  I know that mortgage rates are higher this spring versus last spring. In fact, they are about one percent higher today.  Yes, home loan rates are higher as compared to this time last year however but from a historical point of view, they are epic.  Let me get very personally right now, mortgage rates today are more than 50% less than when my wife and I purchased our first home.  When my wife and I purchased our first home we were able to secure an adjustable-rate mortgage in the mid 9’s and to be transparent, we thought it was a killer rate and looking back, it really was.

Where are mortgage rates headed?  It is difficult to predict where home loan rates are headed with the current global uncertainty.  The opinion of experts is mortgage rates will drift higher especially with the level of inflation we are experiencing. You see mortgage rates are based on Mortgage Bonds.  A bond is a fixed assets and the return is eroded by inflation, so inflation typically accelerates mortgage rates however did you know that homeownership is a hedge against inflation. Again, mortgage rates are low even though thye have moved up over the last several years but these low home loan rates are a positive factor to home affordability.

The third component to home affordability is wages.  Right now, wages is a very positive factoring mixed with the historical low mortgage rates. Wages are up right now and this increase in income has offset a portion of the higher home prices experienced.

Today, buyers’ income is still greater than required to qualify for a mortgage. On a national level the median family income was $88,417 and the qualifying income needed for a home loan was $60,096.  As you know, the Martini Mortgage Group is located in Raleigh and that is considered in the South.  Since real estate is hyper local let us look at the data for the South of the U.S. – median family income in the South was $80,683 and  only $57,768 was needed to qualify. 

Since we are getting hyper local, let us talk about the Raleigh Real Estate Report Card for March 2022.  Raleigh is located in Wake County North Carolina and the population is over one million.  Today there are over 400K renters in Wake County and over 25% of them, over 100,000 of the 400,00 renters can afford to purchase a home. It is important for me to highlight, the Wake County North Carolina affordably index is indication homes in are still affordable considering home prices, mortgage rates and wages.

Before I wrap episode 134 of the Martini Mortgager Podcast  I want to share this with you.  Remember, when you think affordability there are many factors to consider such as home prices, mortgage rates and income.  Yup, when home prices rise and home loan rates rise, it does impact affordability, and experts project both of those things will climb in the months and years ahead. Simply put, that is why it’s less affordable to buy a home than it was over the past two years when prices and rates were lower than they are today. Keep top of mind that wages need to be factored into affordability as well. It is a fact that wages have been rising, and higher wages is a big reason along with historic low rates that, while homes are slightly less affordable, homes are not unaffordable today.

To find out more about home affordability in our local area, just call a mortgage strategist with the Martini Mortgage Group by calling 919.238.4934.  We can discuss where home prices are locally, what’s happening with mortgage rates and how you and your family will be impacted by them..  Know this important fact, it should always be loan first and then go find your home. Deploying the loan first strategy will allow you to make an informed financial decision not an emotional one.

In closing, there is still a massive opportunity to buy a home today.  Perhaps the home will not be as affordable as the one your buddy purchased last year but it will still be affordable and homes are not unaffordable today. 

If you want trusted advice with a digital mortgage process that offer a great rate with certainty check out my website by going to: www.MartiniMortgageGroup.com – you can find some real world information there and you can also securely apply online or book an appointment with me.  Be sure to check out the Raleigh Real Estate Report Card which can be found in the learning center. 

My name is Kevin Martini and thank you for tuning into episode 134 which has been called; ‘Home Affordability Today’

Now it is time for the disclaimer:

This material has been prepared for marketing purposes only. This is not a loan commitment or guarantee of any kind. Loan approval and rate are dependent upon borrower credit, collateral, financial history, and program availability at time of origination. Rates and terms are subject to change without notice. The Martini Mortgage Group at PCL Financial is a division of Celebrity Home Loans, NMLS # 227765 with a Branch address of 507 N Blount St Raleigh, North Carolina 27604. You can contract Certified Mortgage Advisor and Producing Branch Manager, Kevin Martini NMLS# 143962 by calling the Branch and that number is 919.238.4934. For a full list and more licensing information please visit: www.NMLSConsumerAccess.org or by visiting www.MartiniMortgageGroup.com – Equal Housing Lender