Subject Line Ideas: The affordability stat that really matters
iPhone moment for mortgage biz?
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Feature Article:The affordability stat that really matters
Critical Reads:Is this the mortgage industry’s iPhone moment?
The Funnies: What have I done?
One of the hottest topics regarding real estate in the United States is affordability. In some markets, homes in general are very scarce, which drives up prices quickly and deprives cities of “affordable” housing. And there’s no question: Home prices have risen pretty rapidly in the last couple of years. That’s beyond your control. But it’s only part of the affordability equation, and the other part IS within your control.
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The Affordability Stat that Really Matters
A few years ago, I predicted that the United States real estate industry would go through huge spike in home prices. The combination of under-building new homes, still-low mortgage interest rates and a rekindling confidence in homeownership would drive up prices.
Guess what? It happened. Not in every market, mind you, but in general, housing in the United States – as it turns out, buying AND renting – has gotten more expensive rather quickly. Enough so, in fact, that there is worry about what people call “affordable housing.”
That’s kind of an ambiguous term. What’s affordable for you might not be affordable for me. What a person can afford in Des Moines, Iowa, isn’t the same as what a person can afford in San Francisco. Generally, though, affordability is looked at as some relationship between median home values and median household income.
I have written about the affordability before and don’t want to beat a dead horse, but here’s your reminder: Home prices and mortgage rates are only half of the affordability equation. Household income is the other half. And the U.S. Census Bureau recently released a housing vacancy report that drives this point home pretty well.
According to the census data, the median household income right now is $53,657 (I’ve seen it listed much higher recently, for whatever that’s worth). According to the same data, less than half of the households that make less than that median figure own homes. For those above that figure, the homeownership rates jumps to over 80 percent.
This statistic basically says: “If you make enough money, you can afford to own your own home.”
In a way, that’s good news. While you have no control whatsoever over home prices or mortgage interest rates, taxes or insurance costs – all the variables that make homes more or less affordable– you DO have control over your income. Money, unlike land or housing, is not a finite resource. You can always make more of it.
People like to complain about how little money they make, but the ones who hate their income situations enough change them. They get better jobs. They learn new skills to earn more at their current jobs. They start side businesses. They work a second job. All of these things require effort, but any and all of them are things within one’s control. And any and all of them could swing the affordability pendulum in one’s favor.
A part-time second job could mean extra money for a down payment. A promotion at work could mean the difference between qualifying for a $100,000 loan or a $125,000 loan. A side business that allows you to pay down debts could mean access to a lower interest rate on a mortgage.
How badly you want to buy a home determines how willing you are to do any of the above.
Frankly, most people would rather do nothing and complain: “Housing prices are sky-high!” “Oh, no, interest rates are going to rise.” It’s easier to point to things we can’t control as obstacles in our paths than it is to remove obstacles by making changes.
But that census bureau data says nothing about home prices or interest rates. It states plainly and simply that those making more than the median household income are almost twice as likely to own a home than those making less than the median household income. As blunt as it sounds, if you want to own a home, make more than the median household income.
Of course, it’s a little more complicated than that. There are people who simply have better opportunities to get their head above that median income watermark. There are those who have hardships or circumstances that will make it very difficult to get to that level.
But those are the more end-of-the-spectrum groups. While it’s true that the wealth gap is widening and the middle class is eroding, most of us still fall in the somewhere-between range. And that means increasing income – at least to some extent – is well within our control.
And the big affordability stat tells us that’s what matters.
Is this the Mortgage Industry’s iPhone Moment?
“Disruption” is what they call it when a new product, process or company introduces something that completely changes an entire industry. And now Quicken Loans and billionaire owner Dan Gilbert are hoping disruption of the mortgage industry is what follows their introduction of Rocket Mortgage, which Tech Crunch calls a possible “iPhone moment” for the mortgage biz.
Five Ways to Earn Passive Income
Passive income is the goal of just about every investor – make money without trading time or effort for it. Unfortunately, not has the risk-reward tolerance or patience required for true passive income – dividend-paying stocks, money market interest, etc. This Inc.com article outlines five more creative ways to earn passive income that matters.
5 Real Estate Trends for 2016
It’s that time of year again, when “experts” like to predict things for the upcoming year. Of course, real estate is one of the most-predicted things, so it should come as no surprise that the “experts” are out. This U.S. News & World Report article, however, does a pretty good job of explaining what could very well be in store for real estate – at least on a macro level – for U.S. real estate in 2016.
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