Can an Expensive Home Still be Affordable?

Real estate prices across the country have increased dramatically in the past year. With increases in the 10-12% range, many potential homebuyers have given up and decided that homes are just too expensive to consider. While homes have become more expensive, it does not mean they are unaffordable.

Would you believe that we are experiencing a historically favorable market for buyers when it comes to affordability? Why? This is because affordability involves more than just the purchase price of the home. When considering whether you can afford a home, you must include wage growth and interest rates.

Interest rates are among the lowest we’ve seen in decades. In addition, wages are increasing at a staggering 7% rate year-over-year. For example, a median household income of $68,000/year with a 7% wage growth, will see an extra $400/month.

The median home price is about $325,000. If we add a 10% growth factor to this, that same home would sell for $357,500. At a 3.5% interest rate, the monthly payment would increase from $1313/month to $1444/month, an increase of only $131/month. In terms of affordability, today’s market offers homebuyers more for their money.

Many homebuyers indeed have sticker shock; homes are getting more expensive. But for many homebuyers, other economic factors combine to make homes more affordable than ever before.

5 Things Millennial Home Buyers Look For

Millennials have entered the housing market and have ideas about what they want in their new home. Home design trends are becoming more innovative and reflective of the way we live today. These young home buyers want bright homes which are informal and inviting; places where friends and families can gather and relax together. Who Are These Millennial Home Buyers? Millennials are also the first generation that grew up on technology. Most never knew a home without a computer, video game console, or cell phone. They want their spaces to be intuitive and innovative. They buy “smart” products! Self-adjusting blinds, lights, appliances, and other home features appeal to their sense of a technologically advanced home. Homes are being built with these buyers in mind.

Top 5 Home Design Features

1. Urban designs, such as a large loft-style home with great flow

2. DIY Fixer-uppers: Millennials enjoy getting dirty and redesigning their home to suit their tastes

3. Light and bright with tall ceilings and lots of natural light

4. Smart Home devices and features

5. Sustainable materials such as reclaimed wood and energy efficiency.

As they continue to make up a greater portion of first-time home buyers, builders will be creating more and more homes that reflect their unique perspectives. Watch for more innovation, sustainability, and functionality in new home designs over the next decade.