The #1 Misconception in the Homebuying Process

Dated: February 22 2020

Views: 13

The #1 Misconception in the Homebuying Process

The #1 Misconception in the Homebuying Process

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.”

Blog author image

Anthony Atkinson

Anthony Atkinson believes your interests come first. He's experienced, energetic, and committed to your success. For most people the purchase of a home represents much more than a good financial inves....

Latest Blog Posts

Where Will I Go if I Sell My House?

Many homeowners have realized their needs have changed over the past year. Let's connect today to discuss your.

Read More

Should I Update My House Before I Sell It?

Some HighlightsIf you’re deciding whether you should make updates before you sell your house, lean on your agent to be your guide.If the market is flooded with houses for sale, updates may be

Read More

Your Home Equity Is Growing...How's Your Home Trending?

Some HighlightsIf you’re a homeowner, today’s rising equity is great news. On average, homeowners have gained $51,500 in equity since this time last year.Whether it’s funding an

Read More

How To Hit Your Homebuying Goals This Year [INFOGRAPHIC]

Some HighlightsIf you’re looking to buy a home, you may want to put these items on your to-do list to ensure you hit your goals.It’s important to start working on your credit and

Read More
Fair Housing Icon NY Fair Housing Notice