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Affordability is a severely neglected topic. We talk plenty about interest rates and house prices, but talking about affordability and what that conjunctive picture looks like would provide some significant clarity.
Affordability is the conjunction of your house price and your interest rate. If we include wages, that tells a story of what percentage of the population can afford the home. For now, I’ll focus on house price and interest rates.
Now that rates have come down, affordability has definitely changed. Despite the fact that homes are worth more right now than they were this time last year, with lower interest rates, we actually have lower monthly costs and increased affordability. Month over month, affordability hasn’t changed. However, that is likely to change as we anticipate rates continuing to drop.
As affordability improves, I suspect we will begin to see more inventory, and probably more transactions. The average monthly price of a home with 20% down and the corresponding interest rates for the last year are as follows:
2024: $20,586.96
2023: $18,190.72
2022: $15,397.98
2021: $9,9765.26
2020: $9,187.85
2019: $9,263.34
