Simply put: homes are more affordable now for (prepared!) buyers than in recent memory.
According to the “Paycheck to Paycheck: Housing Affordability Report” from the Center for Housing Policy (CHP), buyers of median-priced homes in two metro areas in Minnesota needed less income in 2009 than in 2008.
“Qualifying Income”, according to CHP is “the income required to qualify for a mortgage on the median priced home by assuming a 90 percent loan-to-value ratio — that is, a 10 percent down-payment plus the use of private mortgage insurance. Monthly payments are calculated to include loan principal and interest as well as estimated taxes and insurance. These payments are annualized and assumed to comprise no more than 28 percent of annual income in accordance with conventional underwriting guidelines.”
That means that in 2008, in order to purchase a median-priced home in the Twin Cities of Minneapolis and St. Paul, homebuyer(s) needed a minimum income of just over $59,000.00. In order to afford a median-priced home in 2009, however, the qualifying income had reduced over 14% to just over $50,000.
Here’s a chart from the data for both Mpls/St. Paul and the Duluth Metro areas:
(Click Image To Enlarge)
In addition... there are more programs than ever to assist with down-payment and other entry costs. Does this mean everyone should run out a purchase home now while they’re more affordable? NO, of course not.
Affordability is only one of the MANY considerations homebuyers need to be thinking about when purchasing a home. Others include:
- Long term commitment
- Willingness to undertake maintenance & repairs
- Possible depreciation (2005 – 2009, for example)
- Time required to sell
Before jumping in to homeownership... even with prices as affordable as they are, potential homebuyers need to fully understand the advantages and disadvantages of homeownership. Are you thinking about buying a home in Minnesota? Your first step is to speak with a non-profit Housing Counselor or learn more about the home ownership process in Minnesota by taking a Home Stretch workshop.
Arm yourself with information before proceeding with one of the largest purchases you may ever make!