Housing remains more affordable than historical levels

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Need another sign that housing is a real deal? Real estate remains more affordable than historical averages, according to the latest data from Moody’s.

Nationally, the cost of a house is now equal to 1.5 years of a typical family’s pay. Historically, it’s been about 2 years. During the bubble, it was much higher than that.

The Wall Street Journal reports that in bubble markets like Miami and Phoenix, for example, somewhere around 50% of all purchases were all-cash deals last year. That means so much to me as an investor. When investors are willing to put all their cash in — they’re not leveraging these deals at all — that means they believe real estate is way past value and is in fact a real deal.

Those cash buyers are hoping to make big money by owning properties. Paying all cash means they get a real deal. Why? Sellers are fatigued by the marketplace after they saw every financed offer fall through. So those sellers are jumping all over the cash buyers.  

The entire cycle is at an inflection point. That doesn’t mean we won’t see more drops in value; there could be an unforeseen world event, who knows? But by historical standards, housing is a real bargain right now.



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