“The havoc during the last cycle was the result…of speculation fueled by loose credit. That’s the exact opposite of what we have today.”2) The Housing Affordability Index, which measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home, based on the most recent price and income data. The current index shows that it is more affordable to buy a home today than at any other time between 1990 and 2008. With median incomes finally beginning to rise, houses should continue to remain affordable and housing demand should remain strong. 3) Home prices are well within historic norms. Prices have increased substantially over the last several years; However, those increases followed the housing crash of 2008 and national prices are still not back to 2006 levels. If there were no bubble (and subsequent bust), today’s prices would actually be lower than if they were measured by historic appreciation levels from 1987-1999. 4) Demand for housing, as measured by new household formations, is growing. The Urban Land Institute projects that 5.95 million new households will be formed over the next three years. Even if the homeownership rate drops to 60%, that would be over 3.5 million new homeowners entering the market. 5) New home starts are finally beginning to increase. This helps eliminate the number one challenge in the industry – lack of inventory. And it does so in two ways:
- Some first time buyers will, in fact, purchase a newly constructed home.
- Many current homeowners will move-up (or move-down) to a new construction and then put their current home on the market.