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Jul 28

Affordability

Each month, the National Association of Realtors comes out with their Housing Affordability Index. The number is a composite of the median home price, average interest rate and median household income.  This gives you a reading on how affordable it is for the average family to own a home.

On the graph below, you can see the Affordability factors going back to 1970.  A reading of “100,” the red line on the chart, means the average family makes just enough to qualify for the average home.  You can see that during the late 1970s and early 1980s, affordability was in the negatives, and it was actually cheaper to rent.  Over the last several years, homes have been more affordable than at at time in history.  We topped out at 196.5 in 2012 because of record low interest rates coupled with dropping home prices.  The most recent reading of 159.3 came in May 2014.  That is still a VERY healthy number.

Affordability

 

In my mind, these super high Affordability numbers beg the question:

“If homes are so affordable, how much could someone on minimum wage qualify for?”

Minimum wage here in Yuma is currently $7.90 per hour.  Assuming a 40 hour work week, that equates to $1,369.33 gross monthly income.  Assuming no other debt, that would potentially qualify someone for up to about a $75,000 house on an FHA loan (see disclaimers on the picture below).

Consider a 2-income household where both income earners are making minimum wage.  That should qualify them for house of up to about $150,000.

Minimum Wage

 

That is pretty impressive considering the average home sells for about $135,000 here in Yuma County.

Think about that – a husband and wife, both working minimum wage jobs, can potentially qualify for more than our average-priced home here in Yuma.  Wow!

 

 

 

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