With home prices and interest rates on the rise, you’re likely to assume that the cost of that next Costa Mesa home you’re thinking about buying has made it a financial stretch—especially compared with “the good old days.” But news stories tend to omit the effect of rising incomes and actual inflation on the real cost of a home in today’s market—which turns out to be something of a bargain! A recent calculation may not hold true for everyone, of course—nor does it apply to the cost of every Costa Mesa home—but the details make sense when you think about them. The comparisons are from a study by Zillow Research on housing affordability across the U.S. Researchers were looking into how much havoc the rise in U.S. mortgage interest rates has wreaked on affordability for the typical family. They assumed a current standard 30-year fixed rate of 4.3% (although according to Fannie Mae, last Friday’s average was actually lower: 4.17%). Since the best way to track the cost of a home is by determining the percentage of income needed to buy a home, all that’s required is the typical home’s price, the average mortgage interest rate, and median home buyer’s income. Using that formula, a graph of the outcome shows that overall, the historic percentage of median income required to buy a median-priced home is 21%. In the last quarter of 2017, the same measure came to only 15.7%—just three-quarters of the chunk of income that buyers have had to pay in the past. Of course, unless you are a median person (I’ve never met one of those) buying a median-priced Costa Mesa home, what really matters is the specifics: what you agree to pay for a home; what your own actual income is; and the mortgage interest rates you are offered. Those three elements will make up the cost of the Costa Mesa home you’ve set your sights set on—the price is just one component. And if prices continue to rise as anticipated, by the time interest rates hit 5%, the percentage of median income needed to buy a median-priced home will still be 2½% lower than the historical average. In other words, getting down to the specifics is the only way to determine what is actually affordable in today’s market. Give us a call—helping you with the details is part of our job!
We are built on a philosophy of Heritage & Hustle L3 is a full service real estate agency with a regional office located in the heart of #CostaMesa, offering a wide-array of custom services to meet their clients’ needs with roots in the community since 1976. It’s L3 mission to provide trusted, convenient, responsive service to ensure clients enjoy their real estate experience. L3 was originally formed to offer personal, concierge-level service as an alternative to the large, nationally based real estate companies. From its small beginnings of only two employees, L3 has grown to a full staff of 20 serving over 300 clients a year. L3 is not limited to serving just its clients; it is also committed to serving the community. Not only has L3 donated hundreds of hours to many area charities, they have also received the prestige of being named one of the #toprealestatecompaniesinCostaMesa If you’re interested in #buyingorsellinginOrangeCounty, turn to the experts. Turn to L3 and let them help you make your real estate buying or selling dreams come true. For more information or to get started on finding or selling your home contact L3 today at 714-444-4663 or email us at email@example.com