Housing Wealth: The Missing Piece of the Affordability Equation

The housing wealth and real estate market here in Bixby Oklahoma 74008, Kiefer Oklahoma 74041 and across the nation is soaring today. Residential home values are rising, and that’s a big win for homeowners’ wealth. In 2020, there was a double-digit increase in housing and home values – a trend that’s expected to head toward similar levels this year.

However, skyrocketing prices are causing some Oklahomans to start questioning their wealth and affordability in the current housing market. Many are quick to emphasize the fact that housing today are less affordable than they were last year. Black Knight, a leading provider of data and analytics across the housing life cycle, just reported on the issue.

The findings show the historical averages of the national payment to income ratio, which they define as “the share of the median income needed to make the monthly payments on the median-priced home.” Their study reveals:

  • The average over the last 25 years was 23.6%
  • The average over the last 5 years was 20.1%
  • The average today stands at 20.5%

Right now, housing payments are slightly less affordable than the five-year average – but only by less than ½ a percentage point. However, they’re significantly more affordable than the 25-year average. Put another way, a buyer will likely make a slightly greater financial sacrifice to afford a home right now here in the Tulsa Metro area South of 121st St. in Bixby Oklahoma 74008 and Kiefer Oklahoma 74041 than if they purchased a home within the last five years. On the other hand, it also means the potential financial sacrifice is not nearly as great as it was over the last 25 years.

Does making a sacrifice to buy a home today make financial sense in the long term?

Last week, the Federal Reserve announced that, in the first three months of the year, household’s net worth increased by $968 billion based solely on the values of the real estate they owned. Another report from CoreLogic reveals the average annual gain in homeowner equity was $33,400 per borrower.

Homeownership continues to be the cornerstone to building personal wealth. For most Americans, their home is the largest wealth asset they own. On top of that, the difference between the net worth of homeowners and renters is significant at every income level. Here’s a table detailing that point using data from a study done by First American: Owning a home is an essential steppingstone to grow a household’s net worth. Despite the slightly greater sacrifice in the percentage of monthly income you’ll spend on housing today, for most homebuyers, the payoff of starting to build equity now will be worth it.

Bottom Line

Since housing prices have risen dramatically over the past 18 months, it’s slightly less affordable to buy a home today than it was a year ago. However, when you consider the equity gain and weigh the long-term benefits of building your net worth, the real question might be. Can you afford not to buy now?!   If you are thinking about selling your home South of 121st Street in Bixby Oklahoma 74008, Kiefer Oklahoma 74041, Jenks Oklahoma 74037, Mounds Oklahoma 74047, Glenpool Oklahoma 74033, Sapulpa Oklahoma 74066, or Tulsa Oklahoma. Reach out to me Sabrina Shaw, here at Homes by Sabrina brokered by RE/MAX T-Town as we are always here to guide and serve you in your home selling and buying journey.

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