By Roy Nash,
President/CEO, NeighborWorks Waco
Housing affordability is a challenge we work on every day at NeighborWorks Waco. How do we keep houses affordable for our clients when home prices are sharply increasing, mortgage rates are swelling, and wages are not keeping up with the rise in prices?
The National Association of Home Builders/Wells Fargo Housing Opportunity Index shows that the peak of housing affordability was reached in 2012 when 78% of new and existing home sales were affordable for a typical family based on their incomes and current interest rates. By the third quarter of 2018, that score of 78 had plummeted to 56, meaning only 56% of home sales were affordable. NAHB’s projections show that in 2019, the index is likely to fall below a level of 50% of sales being affordable for a typical family. For low and moderate-income families, the consequences are much worse.
The rise in home prices and mortgage rates has led to the monthly mortgage principal and interest payment rising more quickly than family income, effectively eroding home buyer affordability. In Central Texas, we have enjoyed some of the most affordable housing opportunities in the nation, and for the most part, we still have that advantage. But now, many low and moderate-income families are being priced out of the market because of the factors listed above.
The new 3/BR, 2/BA all-masonry homes we were building and selling in the mid-$90’s just a few years ago are now selling in the mid-$130’s today. And the existing home market is not much better, as homes priced under $100,000 are predominately much older, fixer-upper type properties. These older properties are typically very energy inefficient with high maintenance costs to be expected. So, what is a first-time low to moderate-income homebuyer to do?
Obviously, it would be to their advantage to do a lot of market searching to find the very best housing deals being offered. Plus, they need to have sufficient credit in order to obtain the lowest market-rate mortgage product and hopefully have enough down payment in order to avoid paying mortgage insurance (MI) with their monthly mortgage payments. Being a savvy homebuyer today means doing your homework and being educated about all of the options available. The current housing market is such that you really have to be properly prepared to do homeownership the right way. Our NeighborWorks Waco team stands ready to assist our clients every day in reaching their housing goals. We are certainly a major part of the answer in making housing affordable for today’s homebuyers!