Low Rates Add $120K to the “Affordable” Home Price

As promised in yesterday’s affordability post, here’s an updated look at the “affordable home” price chart.

In this graph I flip the variables in the affordability index calculation around to other sides of the equation to calculate what price home the a family earning the median household income could afford to buy at today’s mortgage rates if they put 20% down and spent 30% of their monthly income.

King Co. Actual & "Affordable" Home Prices

The “affordable” home price has made some strong gains recently thanks to the combination of increasing incomes and decreasing mortgage interest rates. The “affordable” home price in King County hit an all-time high of $496,051 in April, with a monthly payment of $1,820.

If interest rates were at a more reasonable level of 6 percent (which is still quite low by historical standards), the “affordable” home price would be just $379,423—about $120,000 lower than it is today.

Here’s the alternate view on this data, where I flip the numbers around to calculate the household income required to make the median-priced home affordable at today’s mortgage rates, and compare that to actual median household incomes.

King Co. Home Price, Income Req. to Afford

As of April, a household would need to earn $70,439 a year to be able to “afford” the median-priced $480,000 home in King County. This is up from the low of $46,450 in February 2012, but still down slightly from the 2014 high point of $72,625 set in July. Meanwhile, the actual median household income is around $73,000.

If interest rates were 6% (around the pre-bust level), the income necessary to buy a median-priced home would be $92,091—27 percent above the current median income.

In other words (and I realize I sound like a broken record on this), ridiculously low rates are basically the only thing allowing home prices to be as ridiculously high as they are today.

Affordability Index Kept Under Control by Low Rates

Affordability Index Kept Under Control by Low Rates

A reader pointed out that we haven’t looked at how the affordability index is doing in the Seattle area since late last year. Let’s update our standard charts. So how does affordability look as of April? Despite median home prices shooting up, falling interest rates that are back below 4 percent again have kept the […]

Reader Question: Is Seattle just for the super wealthy now?

I received the following question this morning from a frustrated home buyer: We recently lost our second offer on a home to a all case buyer. I know that many other buyers have been at this longer than a year and spent far more than we have but before I get to that poverty point […]

Around the Sound: Strong Seller’s Market Everywhere

Around the Sound: Strong Seller’s Market Everywhere

It has been a while since we checked up on stats outside of the King/Snohomish core, so let’s update our “Around the Sound” statistics for Pierce, Kitsap, Thurston, Island, Skagit, and Whatcom counties. This month’s story in a nutshell: Bad news for buyers, great news for sellers. It’s pretty much a terrible time to buy […]

King County Median Price: Nominal and Real

Median Price May Pass Inflation-Adjusted Peak This Year

As promised, I’ve updated my chart of nominal and real (inflation-adjusted) King County median single-family home prices with data through April. When adjusting into 2015 dollars, the median price peaked at $527,607 in July 2007. April 2015’s median price of $480,000 comes in about 9 percent below that level, and is roughly comparable to where […]

Leafy bubble by Martin Thomas, on Flickr

April Reporting Roundup: “You Should Buy Now” Edition

It’s time once again for the monthly reporting roundup, where you can read my wry commentary about the news instead of subjecting yourself to boring rehashes of the NWMLS press release (or in addition to, if that’s what floats your boat). To kick things off, here’s an excerpt from the NWMLS press release: Northwest Multiple […]

NWMLS: King County Home Prices Near Bubble Peak

NWMLS: King County Home Prices Near Bubble Peak

April market stats were published by the NWMLS yesterday. Before we get into our monthly stats, here’s a quick look at their press release. Pent-up demand triggering record pace of home sales around Western Washington Northwest Multiple Listing Service members notched a record high level of pending sales during April, surpassing the year-ago volume by […]