Tag: Interest Rates

As promised in Monday’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 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 putting 20% down, which would be $129,990 at today’s median price.

If you’re wondering about the lack of posts on these pages recently, the explanation is pretty simple: There just isn’t much to say. The Seattle-area housing market has been in a protracted boom period with ridiculously low inventory of homes for sale and rapidly-climbing prices for years now. In a lot of ways it looks like the housing bubble that was in full swing when I started this blog in 2005, but what’s going on behind the scenes is very different this time around. Is it possible that Seattle really is special this time around and the “bubble” won’t burst this time? … Maybe?

Anyway, I’ve been meaning to update more of the charts of the “fundamentals,” so let’s start with an updated look at our affordability index charts for the counties around Puget Sound.

With all of the first quarter behind us, and the question of whether or not we’re in another real estate bubble here in Seattle on everyone’s minds, let’s take an updated look at our affordability index charts for the counties around Puget Sound.

As of March, affordability has now fallen to its lowest level since November 2008, and as has been the case for quite a while, it would be considerably worse if not for the current absurdly low interest rates.

Median home prices have already begun their annual spring bump, while interest rates have ticked up slightly. The affordability index for King County currently sits at 90.7.

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

The “affordable” home price hit an all-time high of $551,493 in May, thanks to increasing incomes and decreasing mortgage interest rates. The “affordable” home price of $551,493 in King County would have a monthly payment of $2,006.

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 $382,986—about $103,000 lower than it is today.

It was recently requested that I take a refreshed look at the affordability stats, so here’s an updated look at our affordability index charts for the counties around Puget Sound.

As of May, affordability is still not great for home buyers, but it would be much, much worse if not for the current absurdly low interest rates.