When it comes to purchasing a home or investing in real estate, market fluctuations have a major impact on how affordable a given property is. Drivers of this affordability include median income, home prices, interest rates, wage growth, jobs and more. When looking at the Oakland County market, homes are much more affordable today than previous years.
According to data from MBS Highway, Oakland County homes are over 33% more affordable today than they were in 2012. The “Affordability Index” brings together various data points to determine how affordable it is to purchase a home in a particular market. Given strong jobs performance, wage growth and a number of other factors, Oakland County residents are in a good position to buy.
When looking at the chart above, a reading of “100” means that a household earning the median income in Oakland County can afford the median home price with 20% down. In other words, the index is looking at the ability for an Oakland County resident to purchase a home with a conventional mortgage and 20% down. The higher the figure, the less affordable it is to purchase a home.
When looking at 2012 we see that the Affordability Index was over 300, with a significant drop between 2013 and 2014. It has been on a steady decline overall, but this year the index had a modest increase though it still remains the second lowest figure in 10 years.
While this is a great directional statistic for understanding how affordable it is to live in a given market, the reality of home ownership is much more nuanced and complex than that. Fortunately for many home buyers, particularly first-time home buyers, there are many loan options available that make home ownership more within reach.
For example, if you aren’t able to bring a 20% down payment to the transaction, there are still various loan options you can explore. Whatever your situation, the key takeaway from this data is that buying in Oakland County is drastically more affordable today than it was 9 of the past 10 years.
Changes in interest rates, home prices, wages and unemployment could move the Affordability Index up, therefore making it more expensive for home buyers to purchase a home in Oakland County. Overall, it is a good time to buy in Oakland County and if you’re in the market, it’s critical to at least get a sense of what you can afford to buy by talking to a mortgage professional.