Home Prices Are High Right Now. Should I Wait To Buy?

Affordability is a very hot topic right now. Truthfully, there is a lot of bad information out there. It makes sense to assume that increasing home costs equals a decrease in affordability, but there is way more complexity to the answer.

There are two major factors and two minor factors in determining affordability. The two major factors are interest rates and home prices with interest rates being the dominant factor in affordability. (We have written many blogs on this if you would like to see some actual numbers on how interest rates impact payment.) The two minor factors are city taxes and home insurance costs, since these are paid through your mortgage. They are significant factors in cost but fluctuate less often and less significantly than interest rates and prices.

Right now (as of fall of 2021), interest rates are still historically low. Home prices are certainly high. Taxes have gone up, and home insurance costs are a little higher. So, three of the four have gone up; however, the main factor – interest rates – are very, very low.

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So, when you look at an affordability index (see chart below from Keeping Current Matters) we are about par for the course. All this talk about being priced out of the market and how “expensive homes are” doesn’t look at the whole picture. Before you make a decision as important as this, look at the whole picture.