{"id":105331,"date":"2018-09-21T10:00:23","date_gmt":"2018-09-21T17:00:23","guid":{"rendered":"https:\/\/seattlebubble.com\/blog\/?p=105331"},"modified":"2018-10-01T07:12:50","modified_gmt":"2018-10-01T14:12:50","slug":"the-difference-between-affordable-and-actual-home-prices-hit-an-all-time-record-in-may","status":"publish","type":"post","link":"https:\/\/seattlebubble.com\/blog\/2018\/09\/21\/the-difference-between-affordable-and-actual-home-prices-hit-an-all-time-record-in-may\/","title":{"rendered":"The difference between affordable and actual home prices hit an all-time record in May"},"content":{"rendered":"

Reminder: Subscribers have access to the members-only spreadsheets folder<\/a>, which is updated with the charts in this post.<\/em><\/p>\n

As promised yesterday, here’s an updated look at the “affordable home” price chart.<\/p>\n

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 $133,800 at today’s median price.<\/p>\n

\"King<\/a><\/p>\n

The “affordable” home price has bounced around between about $550,000 and $590,000 since the beginning of 2017. The current “affordable” home price of $568,758 in King County would have a monthly payment of $2,319.<\/p>\n

The current gap of $100,242 between the affordable price and the median price is similar to the difference we saw between the two numbers in March and April of 2006. Just a few months ago in May the difference was a whopping $168,447, which is actually higher<\/em> than the previous record high of $167,363 that was set in July 2017<\/strong> (the peak month for prices during the previous bubble). This definitely supports the argument that the current slowdown in sales is due largely to a lack of affordability.<\/p>\n

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 $483,485—about $85,000 lower than it is today, and $185,515 below the current median price.<\/p>\n

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.<\/p>\n

\"King<\/a><\/p>\n

As of August, a household would need to earn $109,108 a year to be able to “afford” the median-priced $669,000 home in King County. This is up from the low of $46,450 in February 2012, but down slightly from the May 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 $93,000.<\/p>\n

If interest rates were 6% (around the pre-bust level), the income necessary to buy a median-priced home would be $128,352—38 percent above the current median income.<\/p>\n","protected":false},"excerpt":{"rendered":"

As promised yesterday, here’s an updated look at the “affordable home” price chart.
\n\u2026
\nThe “affordable” home price has bounced around between about $550,000 and $590,000 since the beginning of 2017. The current “affordable” home price of $568,758 in King County would have a monthly payment of $2,319\u2026<\/p>\n","protected":false},"author":2,"featured_media":105334,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"On the blog: The difference between affordable and actual home prices hit an all-time record in May","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[8,616],"tags":[28,704,61,223],"coauthors":[1158],"class_list":["post-105331","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stats","category-counties","tag-affordability","tag-big-picture","tag-fundamentals","tag-interest-rates"],"yoast_head":"\nThe difference between affordable and actual home prices hit an all-time record in May \u2022 Seattle Bubble<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/seattlebubble.com\/blog\/2018\/09\/21\/the-difference-between-affordable-and-actual-home-prices-hit-an-all-time-record-in-may\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"The difference between affordable and actual home prices hit an all-time record in May \u2022 Seattle Bubble\" \/>\n<meta name=\"twitter:description\" content=\"As promised yesterday, here's an updated look at the "affordable home" price chart. \u2026 The "affordable" home price has bounced around between about $550,000 and $590,000 since the beginning of 2017. 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