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Home Buying: Finding Affordability in Today’s Market

Today’s affordability situation can be scary for those just starting their housing search. Believe us; we’ve been through this with numerous clients. The good news is that you’re not alone in this. At Mirabilis Homes, we’ve dedicated every second of our time and every ounce of our energy to making the home-buying process as easy as possible for you.

But first, let’s take a clear look at the situation we find ourselves in. In the U.S., home values are rising, inventories are lower than ever, and mortgage rates are rising at the fastest rate since the 1980s. Many homebuyers struggle with affordability issues as mortgage payments rise and their purchasing power declines. An October 2021 survey revealed that about half of Americans (49%) see housing as a significant problem – a 10% increase from early 2018.

Many factors have contributed to the housing market’s financial challenges that American homeowners and renters face. For instance, incomes have not kept pace with housing costs. In addition, housing construction has slowed significantly.

The COVID -19 pandemic has further strained the availability of homes and apartments due to the buying frenzy triggered by temporarily record-low mortgage rates. In January 2022, inventories reached their lowest level in recent history.

The pandemic also had other dynamics at play. By mid-2020, there was growing interest in second homes, and many took advantage of remote work and low mortgage interest rates to invest.

So home affordability is clearly a serious problem we need to address as a society, especially now that property values and mortgage rates are rising. To understand this situation, let’s look at some essential factors determining how affordable real estate is for buyers.


Are Today’s Homes Less Affordable Than in Past Decades?

Looking at the big picture of the housing industry, price is only one component that makes up the monthly cost of housing. There are other determining factors, such as the mortgage interest rate at the time of purchase. And it’s almost always pricing that makes the headlines.

And yes, the news is right: buying a home is less affordable today than it was a year ago. But again, you cannot single out a trend from its evolutionary context. Is it less expensive to buy a house today than 10 years ago? What about 20 years from now? What is the appropriate reference point for this comparison, if any?

There is no doubt that the price of a house has risen substantially over the last 45 years. But the price increase has not stopped there. Choose any other consumer goods such as milk and bread. Their prices have also increased. Inflation is no stranger to the economy. Not to mention that the cost of home ownership has always been higher over the last 45 years, except for 2010 and 2020.

Still, last year was no ordinary year. The pandemic brought home to us the importance of homeownership. This proved to be a huge motivator for many people to move from renting to owning a home. Even homeowners began reevaluating their current house and considered moving to an ideal home that would better suit their lifestyle and needs.

So does home ownership still make sense? Is it a good investment? Is it worth the financial risks involved? Let’s first look at the main factors responsible for the fluctuations in real estate prices.

Rising Demand & Limited Supply

According to the Federal Reserve, as home sales have increased, active housing listings have decreased, causing a jump in the median home sale price. The most recent data shows that the national median price to sell a single-family home has also increased by 25%, from $327,100 in the fourth quarter of 2019 to $408,100 in the fourth quarter of 2021.

However, home buyers were not the only vulnerable group. Rental prices have also risen sharply, indicating a 17% increase in median rents in the 50 largest U.S. metro areas. According to a recent report, a one-year lease now costs about $3,400 more than it did two years ago. Rising rents are leading more renters to consider homeownership.

U.S. Census Bureau data show that housing availability is under pressure from an unprecedented increase in American homeowners in 2020. In short, rising demand and limited supply have put intense upward pressure on housing prices.

Higher Interest Rates

After a long period of historically low-interest rates, homebuyers face a new challenge. The Federal Reserve raised the federal funds rate three times in 2021 to fight inflation, and more increases are planned for this year.

So we are faced with a situation where both purchase prices and interest rates are rising, and it appears that incomes have not kept pace with home values. The March Bloomberg report found that across all income levels, only 18% of consumers reported that their incomes were keeping pace with the increased cost of living.

Inflation has also increased the cost of items such as window treatments, furniture, and lawn mowers needed for a new home. From May 2021 to May 2022, the Consumer Price Index, which measures prices for goods and services, rose 8.6%, nearly reaching its highest level in more than 40 years.

So, here’s the million dollar question: Is buying a home a risky investment if we solve the affordability issue? The fact is that buying a home today is relatively cheaper than other investments, even if we calculate the total price of the home plus mortgage interest, property tax, homeowner’s insurance, and so on.

Solutions to Housing Affordability

Complex problems often require complex solutions, and our issue is no exception. Housing affordability requires a comprehensive, holistic approach involving all community members and related governmental and non-governmental organizations.

The good news is that with Mirabilis, you don’t have to deal with these complexities. We offer a simple, straightforward homeownership solution and fully support every affordable housing program that creates more housing, preserves existing housing, and protects residents from displacement. Here are a few examples:

Exploring New Construction Methods

Rising construction prices are indeed a significant factor in housing affordability. As a result, we must constantly explore and evaluate alternative building methods, including modular construction, panelized construction, 3D printing, and repurposed shipping containers.

Many of these new construction methods are still in development until they can be widely applied. Nonetheless, they offer the possibility of reducing construction costs as well as time and facilitating access to materials.

At Mirabilis, we’ve always been committed to providing opportunities for our clients and improving the housing market by partnering with reliable builders and promoting our homeownership program.

Investing in Underutilized Spaces

One of the critical concerns we need to address in the U.S. is building homes at a sustainable rate that matches population growth. It was shockingly reported in the Huffington Post that despite population growth, there are fewer homes on the market today than there were in 1982.

Converting underutilized properties – including hotels, motels, vacant apartments, and school lots – into permanently affordable housing is undoubtedly one of the many viable options. This may also positively impact the education workforce, who are forced to either leave their local communities or change careers as the only way to keep up with the rising cost of living.

Lower-Cost Housing Options

An underappreciated solution to the housing problem is protecting “naturally occurring affordable housing,” such as multifamily rental properties. These are typically older buildings owned by mom-and-pop landlords. Although these properties make up the majority of affordable housing in the United States, the ability to preserve them is increasingly in jeopardy.

Recently, there have been efforts to preserve these types of buildings in neighborhoods and protect local landlords and their residents. Central to these efforts is helping landlords reduce the cost and increase the value of their properties.

All organizations associated with the housing industry should work to provide them with free access to property management solutions, rent loss grants, and financial counseling, while exploring assistance programs at the local, state, and federal levels.

Supporting Home Financing

Many communities in the U.S. lack adequate access to affordable financial services, a significant barrier to homeownership. An estimated 20% of Black Americans applying for mortgages in 2020 were turned down, the highest rejection rate of any racial or ethnic group.

For this reason, solutions like equity-based financing play a significant role in solving the housing problem. Equity-based financing is an opportunity for working families and communities of color to purchase a home. Communities of color and racial minorities often don’t have access to other sources of support like family loans or intergenerational wealth.

At Mirabilis Homes, we’ve developed a co-ownership program called Mirabilis’ INTRO Program to help you on your path to homeownership with only a minimal down payment and no additional debt. The INTRO program doesn’t require you to take out a mortgage. So don’t worry about rising interest rates; we’ve got you covered.

Bottom Line

Ultimately, do not be discouraged by intimidating headlines about the affordability of homeownership. There is always a solution to every problem. Your options may have been limited compared to last year, but at the end of the day, you have every chance of getting a deal that will improve your life quality. So when you are ready to buy a home, act fast. After all, price fluctuations are never predictable, and historical affordability trends do not always benefit procrastinating buyers.

If you’re considering buying a home or need help exploring the current real estate and housing market, you’ve come to the right place. Mirabilis Homes is here to help you. We aim to facilitate the homeownership process and help you become an owner without additional debt and a minimum down payment.

Knowing all the hurdles along the way, we offer an alternative solution to traditional home buying approaches. Our INTRO program encourages clients to buy their dream home while maintaining financial security. Let’s help you deal with affordability and choose the best property for you.  Don’t hesitate any longer and contact us today!


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