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The Shocking Reason Why Homes Are So Affordable Right Now


Affordability is on the tip of everybody's tongues right now.

Why is affordability so important?

Well, it's a measurement of how affordable it is for the average person in America to own a home.

NAR has studied this every single month and they gave us a Home Affordability Graph. And you might expect this, but home affordability has actually been going up because of something substantial, which is interest rates going down.

As interest rates go down, affordability goes up.

That's despite the fact that we've had actually super fast rising prices, right? Prices starting to go into double digit territory across the country. And then we see interest rates going down, which pushes affordability up.

But because home prices have gotten so high recently, that's actually starting to level off and come back down. But we recently had another upswing. So we're measuring a few things when we look at affordability.

When NAR looks at affordability, they look at:

1. Average interest rates in the marketplace

2. What the average homeowner will pay for a home in the marketplace

But they also look at something else:

3. The third rail

The third rail, as it relates to affordability is how much people have as a household income.

This is shocking: Despite the COVID year that we went through, household income went up dramatically. Depends on the study you look at, but it's between 15% and 16% in the course of last year.

Since people had this huge upswing in their income, it actually makes homes a more affordable, relatively speaking.

Even though home prices are rising because interest rates have stayed low, this third rail is actually helping the market in another level. It's another tail wind of the market.

That's exciting news for us as a real estate professionals.

The other thing is we're seeing a ton of this next generation of buyers. Not just millennials, but actually generation Z coming into the market and starting to push the market even further forward faster.

So high demand and low supply equals a fantastic real estate market.

I hope you're taking advantage of it and finding all those opportunities in the market.

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