I bought my first house in Garland TX for $119,000 in 2003. 3 beds, 2.5 baths, a 'not bad' neighborhood. My wife was a teacher and we could afford it just on her income.
Looked up that house recently and it was for sale, now at $250,000 18 years later. Someone had updated it with typical flipper grade stuff, but ok it's double what it was even 5-10 years ago.
So then I go do the math on monthly payments for it. The interest rate back in 2003 was like 7-8%, and now we're down to 3%. Turns out the monthly payments I made 18 years ago and today are about the same.
We bought our second house in 2007, and similarly the price it fetches now is much higher, but the payments would be similar.
If you look at housing affordability like rent affordability; that is, what monthly payment can you afford, it seems like house prices are increasing to match interest rates decreasing. That house in Garland TX, inflation adjusted, is now MORE affordable than it was 18 years ago, even though it's purchase price has doubled.
EDIT to add - I now live in the Bay Area and this pattern doesn't hold up here. But most nation-wide patterns don't really hold up here. The house we bought in Oakland in 2016 has doubled, but we were already at like 4.25% back then, so the lower interest rate doesn't offset the whole increase.
I bought my first house in Garland TX for $119,000 in 2003. 3 beds, 2.5 baths, a 'not bad' neighborhood. My wife was a teacher and we could afford it just on her income.
Looked up that house recently and it was for sale, now at $250,000 18 years later. Someone had updated it with typical flipper grade stuff, but ok it's double what it was even 5-10 years ago.
So then I go do the math on monthly payments for it. The interest rate back in 2003 was like 7-8%, and now we're down to 3%. Turns out the monthly payments I made 18 years ago and today are about the same.
We bought our second house in 2007, and similarly the price it fetches now is much higher, but the payments would be similar.
If you look at housing affordability like rent affordability; that is, what monthly payment can you afford, it seems like house prices are increasing to match interest rates decreasing. That house in Garland TX, inflation adjusted, is now MORE affordable than it was 18 years ago, even though it's purchase price has doubled.
EDIT to add - I now live in the Bay Area and this pattern doesn't hold up here. But most nation-wide patterns don't really hold up here. The house we bought in Oakland in 2016 has doubled, but we were already at like 4.25% back then, so the lower interest rate doesn't offset the whole increase.