February 10, 2019 Ralph Ragette

How to Get a Better Perspective on Affordability


Buyer confidence and high demand remain strong in Westchester County while our local home inventory remains historically low.  Purchasing a home is one of the largest financial decisions most will make in their lifetime.  This blog’s main purpose is to help educate the consumer on the real estate process and to provide up-to-date information on our local market conditions.

Today I would like to talk to you about Affordability


Headlines spotlight the fact that buying a home is less affordable today than it was at any other time in more than a decade. Those headlines are accurate.

Understandably, buying a home is more expensive now than immediately following one of the worst housing crashes in American history. Over the past decade, the market was flooded with distressed properties (foreclosures and short sales) selling at 10-50% discounts. There were so many that this lowered the prices of non-distressed homes in the same neighborhoods. As a result, mortgage rates were kept low to help the economy.

Prices have since recovered. Mortgage rates have increased as the economy has gained strength. This has impacted housing affordability. However, it’s necessary to give historical context to the subject of affordability.

Two weeks ago, CoreLogic reported on what they call the ‘typical mortgage payment’. As they explain:

“One way to measure the impact of inflation, mortgage rates and home prices on affordability over time is to use what we call the ‘typical mortgage payment.’ It’s a mortgage-rate-adjusted monthly payment based on each month’s U.S. median home sale price. It is calculated using Freddie Mac’s average rate on a 30-year fixed-rate mortgage with a 20 percent down payment…

The typical mortgage payment is a good proxy for affordability because it shows the monthly amount that a borrower would have to qualify for to get a mortgage to buy the median-priced U.S. home…

When adjusted for inflation, the typical mortgage payment puts homebuyers’ current costs in the proper historical context.”

Here is a graph showing the results of CoreLogic’s research:

How to Get a Better Perspective on Affordability | Simplifying The Market

As the graph indicates, the most recent calculation remained 28% below the all-time peak of $1,275 in June 2006. That’s because the average mortgage rate at that time was 6.68%. As seen in the graph, both today’s typical payment and CoreLogic’s projection for the end of the year are less than it was in January 2000.

Bottom Line

Even though home prices are appreciating at a slower rate, home affordability will likely continue to slide. However, this does not mean that buying a house is an unattainable goal in most markets. It is still less expensive today than it was prior to the housing bubble and crash.


Source: KCM Ralph Ragette Blog

To assure that you make the best possible decisions, it’s important that you have a knowledgeable agent on your side who is an expert in the local real estate market.  Our goal is to provide you with as much information as needed to make well-informed decisions throughout your home purchase or home sale in Westchester County, New York. 

To Search ALL Westchester County Real Estate Listings, visit www.Ragette.com

To reach Ralph, please call (or text) 914-202-1101 or send an email to Ralph@WestchesterHomeAdvisor.com

Ralph Ragette

Ralph Ragette, Ragette Real Estate. Ralph is a 5th generation Realtor in Westchester County New York. His firm was started by his great-great grandfather in 1885.