There are many headlines about how housing affordability is declining. The headlines are correct: it’s less affordable to purchase a home today than it was even a year ago. However, it’s important to give this trend context. Is it less expensive to buy a house today than it was in 2005? What about 1995? What happens if we go all the way back to 1985?
Obviously, the price of a home has appreciated dramatically over the last 45 years. So have the prices of milk, bread, and just about every other consumable. Prices rise over time – we know it as inflation. However, when we look at housing, price is just one component that makes up the monthly cost of the home. Another key factor is the mortgage rate at the time of purchase.
At every other point, even in 1975, it was more expensive to buy a home than it is today. If you want to buy a home, don’t let the headlines about affordability discourage you. You can’t get the deal your friend got last year, but you will get a better deal than your parents did 20 years ago and your grandparents did 40 years ago.