“Affordable” home price shot up 33% in less than two years

Reminder: Subscribers have access to the members-only spreadsheets folder, which is updated with the charts in this post.

As promised last week, 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 spent 30% of their monthly gross income on their home payment. Don’t forget that this math includes the (giant) assumption that the home buyers are putting 20% down, which would be $148,590 at today’s median price.

King Co. Actual & "Affordable" Home Prices

The “affordable” home price has shot up from $530,359 in November 2018 to an all-time high of $706,800 as of August. The current “affordable” home price in King County would have a monthly payment of $2,365.

The current gap of $36,150 between the affordable price and the median price is similar to the difference we saw between the two numbers in mid-2005.

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 $493,215—more than $200,000 below where it is today, and nearly $250,000 below the current median price.

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 August, a household would need to earn $99,466 a year to be able to “afford” the median-priced $742,950 home in King County. This is up from the low of $46,450 in February 2012, but down slightly from the May 2018 high of $119,004. The previous cycle high in July 2007 was $99,321. Meanwhile, the actual median household income in King County is estimated to be about $94,500.

If interest rates were 6% (around the pre-bust level), the income necessary to buy a median-priced home would be $142,540—51 percent above the current median income.

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NWMLS: Pending sales hit an all-time high in August

August market stats were published by the NWMLS on Friday before the holiday weekend. The King County median price of single-family homes rose over 10 percent year-over-year for the first time since May of 2018. Inventory is way down from a year ago, and pending sales climbed to an all-time record high

The pandemic has sparked a massive seller’s market and big price spikes around Seattle

Okay, let’s get back to the data. It’s about time. Okay, it’s way past time. Anyway, whatever. Here’s some data. Since it’s been a while, let’s start with a few high-level stats from around the Puget Sound…