Misconception When it Comes to the Homebuying Process

    The #1 Misconception in the Homebuying Process

    The #1 Misconception in the Homebuying Process | MyKCM

    After over a year of moderating home prices, it appears home value appreciation is about to reaccelerate. Skylar Olsen, Director of Economic Research at Zillow, explained in a recent article:

     “A year ago, a combination of a government shutdown, stock market slump and mortgage rate spike caused a long-anticipated inventory rise. That supposed boom turned out to be a short-lived mirage as buyers came back into the market and more than erased the inventory gains. As a natural reaction, the recent slowdown in home values looks like it’s set to reverse back.”

    CoreLogic, in their January 2020 Market Pulse Report, agrees with Olsen, projecting home value appreciation in all fifty states this year. Here’s the breakdown:

    • 21 states appreciating 5% or more
    • 26 states appreciating between 3-5%
    • Only 3 states appreciating less than 3%

    The Misconception

    Many believe when real estate values are increasing, owning a home becomes less affordable. That misconception is not necessarily true.

    In most cases, homes are purchased with a mortgage. The current mortgage rate is a major component of the affordability equation. Mortgage rates have fallen by almost a full percentage point since this time last year.

    Another major piece of the equation is a buyer’s income. The median family income has risen by 5% over the last year, contributing to the affordability factor.

    Black Knight, in their latest Mortgage Monitor, addressed this exact issue:

     “Despite the average home price increasing by nearly $13,000 from just over a year ago, the monthly mortgage payment required to buy that same home has actually dropped by 10% over that same span due to falling interest rates…

    Put another way, prospective homebuyers can now purchase a $48K more expensive home than a year ago while still paying the same in principal and interest, a 16% increase in buying power.”

    Bottom Line

    If you’re thinking about purchasing a home, realize that homes are still affordable even though prices are increasing. As the Black Knight report concluded:

    “Even with home price growth accelerating, today’s low-interest-rate environment has made home affordability the best it’s been since early 2018.”

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    Sandra Lowrey

    If you're planning to sell your home in the next few months, nothing is more important than knowing a fair asking price. We would love to help you with a FREE Market Analysis. We will use comparable sold listings to help you determine the accurate market value of your home. The Huntsville real estate market is one of the most stable in the country. From being the top in the nation in business growth to the top in real estate growth, Huntsville, AL lives up to its name by being recognized in national publications such as US News & World Report's 2018 list as the No. 7 Best Places to Live, No. 8 Best Cities to Buy a House in America according to Niche 2018 Best Places List, and No. 1 in job growth in the tech industry in 2017 according to StateTech, along with many other accolades. Not to mention our world leading NASA agency and Redstone Arsenal! Let one of our Lowrey Team members help you find your next home in Huntsville or the surrounding areas.

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