My Real Estate Blog

Not only have home values fallen in many key markets, making home ownership more accessible to the average buyer, interest rates are at historic lows, meaning that once a home is purchased, monthly payments are smaller than in our recent past.

Today’s median home buyer can expect to pay about 17% of his monthly gross income on his mortgage, compared to a 25% average since 1975.

In the 1980's, when interest rates were dangerously near 20%, it would take up nearly 45% of a buyers gross monthly income. In comparison, today's rates are an extreme bargain.

The main road block to home ownership at this time is access to credit. Although nearly one-third of home purchases in recent months have been all-cash, that leaves the majority of the market shares requiring financing. The tightening of lending standards in recent years, though, has been in direct response to the sub-prime lending trend during the housing boom.

Federal Reserve research indicates that a quarter of all mortgages in 2006 were sub-prime. This means that these loans were made to borrowers with credit scores below 620-660 and who were unable to put down the traditional 20%.

Today, buyers need credit scores in the 700s, with the higher the better.  Applicants with credit scores under 620 are virtually unable to get loans at any rate, thus being effectively excluded from the home-buying market. Those with credit scores below 620 represent almost a third of the population.

So, while it is more difficult for many homeowners to get into the market in today's economy, for buyers who have good credit and adequate savings, homes may never have been more affordable.