mortgage simple definition: Affordability Mortgage Mondays #62

Affordability Mortgage Mondays #62

Affordability Mortgage Mondays #62 video duration 5 Minute(s) 17 Second(s), published by Matt the Mortgage Guy on 18 04 2016 - 23:26:09.

https://www.mattthemortgageguy.com 916-529-7600 This episode I talk about affordability
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https://www.mattthemortgageguy.com 916-529-7600 This episode I talk about affordability. I explain how a 6% increase in real estate prices doesn't mean we need a 6% increase in income to support the increased payment.

Matt the mortgage guy on Mortgage Mondays episode 62 where I talk affordability and it’s something that comes up quite often so I want to make a short little video to clear up maybe some misconception’s and stuff that’s out there in the media about affordability and the current state of the housing market.

Affordability’s coming up as we’ve seen it’s quite a run up in California especially in the past few years of appreciation so homes became more and more expensive, people are worried about affordability.
Will people still be able to afford these houses and one thing to look at that’s probably not well understood by mainstream media is the wuote numbers and the appreciation of real estate in California last year was something like 7% appreciation and then they will quote that number then I’ll say the medium income has only got up to 2. 5% while real estate has only gone up 7%.

My buddy Berry Habib does a really good job in making this more concise for those of us who can understand it to really explain how you don’t need a one to one match you don’t need income to increase as much as home prices for people who are able to afford those homes. I will give an example to make it a little more clear.

Let’s say in your household you guys have an income, combined income for eight thousand dollars a month.

And you know you’re expected to get a raise of 5% I work with a lot of state employees they are getting a 5% raises so that 5% raise on an eight thousand dollar monthly income is a $400 dollar a month increase.

Now if home prices are appreciating in a faster pay let’s say 6, 7, 8 % which they have been the last couple of years but you know something like that is a lot healthier than people think they think, they think that home practice are going crazy but really they are increasing at a very healthy rate so a 300K purchase with 5 or 10% down if you see a 6% increase that going to raise you payment by a 100 dollars a month so as you can see even though you home price appreciation at 6% is higher that the incoming increase of 5 % its only 100 dollar increase in you mortgage payment verses the $400 dollar raise. So it’s really in line especially consider that the average mortgage it usually going to one fourth of what somebody makes so a 100 dollar increase in mortgage payment compare with the 400 dollar increase in income you know year over year in 15/16 is something that’s healthy and its maintainable. Folks think as home prices increase where never going to be able to keep up were never make more money that we need and they won’t be able to afford these houses but the truth of the matter is we are and when the quote medium income creases 2 and a half % they are including everybody and Berry Habib had a good example of this you know you take the averaged scoring of the basketball team and you say there 12 players and a 120 points were scored the average player scored 10 points but what you didn’t here is that only 8 of them played.

If you talk about the 8 that are playing its each 15 points and the same could be said for the income increases.

You know that same of the folks work in jobs that are never going to see income increase they are working in part time jobs and things of that nature. So people that are in the game and people that are buying houses are usually seeing something closer to 5% income increase from year to year and so 6, 7, 8% increase in home prices really isn’t going to out pace them as my example show where the income went up 400 dollars and payment went up a 100 dollars.

So that’s that I think the housing market is fairly healthy obviously we cannot see prices run up to 7 or 8 % forever so they might obviously stabilize for the time being don’t think he sky is falling, don’t think that affordability is something that can’t be maintained with the current increases of income any questions at all feel free to reach out to Matt the mortgage guy Mortgage Mondays

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