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    How to Determine If You Can Afford to Buy a Home

    The gap between the increase in personal income and residential real estate prices has been used to defend the concept that we are experiencing an affordability crisis in housing today.

    It is true that home prices and wages are two key elements in any affordability equation. There is, however, an extremely important third component to that equation: mortgage interest rates.

    Mortgage interest rates have fallen by more than a full percentage point from this time last year. Today’s rate is 3.75%; it was 4.86% at this time last year. This has dramatically increased a purchaser’s ability to afford a home.

    Here are three reports validating that purchasing a home is in fact more affordable today than it was a year ago:

    CoreLogic’s Typical Mortgage Payment

    “Falling mortgage rates and slower home-price growth mean that many buyers this year are committing to lower mortgage payments than they would have faced for the same home last year. After rising at a double-digit annual pace in 2018, the principal-and-interest payment on the nation’s median-priced home – what we call the “typical mortgage payment”– fell year-over-year again.”  

    The National Association of Realtors’ Affordability Index

    “At the national level, housing affordability is up from last month and up from a year ago…All four regions saw an increase in affordability from a year ago…Payment as a percentage of income was down from a year ago.”

    First American’s Real House Price Index (RHPI)

    “In 2019, the dynamic duo of lower mortgage rates and rising incomes overcame the negative impact of rising house price appreciation on affordability. Indeed, affordability reached its highest point since January 2018. Focusing on nominal house price changes alone as an indication of changing affordability, or even the relationship between nominal house price growth and income growth, overlooks what matters more to potential buyers – surging house-buying power driven by the dynamic duo of mortgage rates and income growth. And, we all know from experience, you buy what you can afford to pay per month.”

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    John Jones

    During his 25 years in real estate, John has helped more than 5,000 families handle their real estate needs. Nobody has sold more homes in Rutherford County than John and there is not even a close second. Before opening his own brokerage he was a perennial top producer for Coldwell Banker from 1998 to 2008, consistently ranking among the top 1% of agents in the nation. In October of 2008, John realized his vision of a small boutique real estate firm that offers the best in customer service, market knowledge, wealth building opportunities, and innovative techniques that get homes sold. John also offers several revolutionary programs to his clients such as the Guaranteed Sale Program, No Show Offer, and the Fixer-Upper program.

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