Home Affordability and the Price of Housing

As we are coming out of arguably the most unprecedented time in the mortgage industry, and in our country’s history, the topic of home affordability and the price of housing is front and center.

We have seen historic low interest rates, allowing most the option to refinance  – and the ability to purchase the new home of their dreams.  With that demand, price appreciation has been pushed to the highest levels on record, an 18.1% increase from August 2020 – August 2021, this according the most recent Core Logic Home Price Index.

We know these numbers are not sustainable, “the price gain has far exceed income growth and eroded home affordability” wrote Frank Nothaft, chief economist for Core Logic.  As we look forward, there are several factors to consider when we think about the future of housing growth and affordability.

Housing growth and appreciation will level off, that’s a good thing, there are several bullet points to consider and think about when looking ahead.   The Millennial Generation is here, and they are buying and wanting to buy, with the average age of 33 being peak homebuyer age for this demographic, the next several years will continue to see demand stay strong.  The waver of buyers coming to the market could be the largest we have seen since the baby boomer generations in the early 80’s.   This generation is more prepared than previous generations, meaning they have the ability to buy, with stable to solid incomes and access to capital to make it work.   

As things stabilize, and become more ‘normal’, going forward we should get back to moderate price increases, not near what we have seen over the last 18 months or so, this is also a good thing.   The concerns of a housing bubble, which can be found in so many articles, will subside. 

Those in the mortgage and real estate industry over this last couple of years, we have been so fortunate.  When the pandemic hit us, we didn’t know for sure what was going to happen, how everyone would react, how this would look in the bigger picture of everyday life.  We learned that as humans, we adjust and adapt, really quickly, and move on with our lives.   

We will keep helping people, one day at a time, doing our best, with the consumer’s best interest in mind.   Wishing you the best for a strong finish to this year, thank you to the all those that have supported us, we are grateful.

Take care.

Joe Theisen, Branch Manager
Fairway Independent Mortgage Corp
Madison, WI
Email: joet@fairwaymc.com