Housing is more affordable now than in the past

Low interest rates offset lagging wages, Trulia study says.

Anyone looking at rising housing prices — especially people who would like to buy their first home now — would assume that houses are less affordable than ever before.

Home prices have been rising faster than wages for years. But researchers at Trulia, an online residential real estate site, found that mortgage rates have a bigger impact on affordability than home prices and income changes.

Researchers determined that nationally houses are the most affordable now than in the last nearly 40 years. In 2016, a household with the median income could afford a home 1.5 times more expensive than the median home price. In 1980, a household with the median income could afford a home valued at threefourths of the median price.

Trulia’s affordability score compares the highest price a household with the median income could afford with median home prices in each year. The highest affordable price is determined based on a 20% down payment on a mortgage.

The Trulia study points out the staggering difference between income growth and home price increases: Adjusting for inflation, median incomes have grown 27% between 1980 and 2016, while median home prices increased 62 percent during that same period.

Mortgage rates — which were above 16% in the 1980s and dropped below 4% in 2016 — mean houses became increasingly affordable despite the wage/home value gap.

Of course, affordability is influenced heavily by location. Trulia’s look at 100 of the country’s largest metro areas over the decades found that only Miami became unaffordable between 1990 and 2016, which means that a household earning the median income can’t afford a house at the median price.

Other cities that became less affordable include Denver and Portland, Ore. Surprisingly, some of the cities with the highest home prices — San Francisco; Seattle; Austin, Texas; and Washington — became more affordable for home buyers.

The study also found if the homes in the metro areas with the highest price increases are unaffordable now, they’ve always been unaffordable.