Housing Affordability Low, but Buyer Demand Remains Steady

Homes selling for higher prices

By Ty Morris

I sat down with a client the night before listing their home which was in a great location and had no deferred maintenance. We had already increased their listing price by $20,000 during the six months leading up to their listing date, and I said to them just 12 hours before listing: “I think we should list for $10,000 more.” 

Mr. Seller was thrilled to hear this, but Mrs. Seller didn’t understand how we could just do that. My response was something I’ve been saying quite often during listing appointments lately: “You’re going to list your home for X, and it is going to sell for Y. We don’t know what Y is, but the chances are in your favor that Y is greater than X.” 

So we did, and 48 hours later we were negotiating a purchase contract well over X. Y is what the home sells for. Y is market value. And if X is wisely determined by your trusted real estate agent, then you will be happy with Y.

Buyer demand has not faltered, even with New Hampshire affordability at an all-time low:

Housing affordability is measured by the affordability index. The affordability index is the percent ratio of income to median mortgage amount. Between 2012 and 2016 it was as high as 220 and never fell below 150.  Specifically, if the index is 150, this means that the median owner has 50% of their income left after qualifying for their mortgage. Does that make sense? Currently, the index is at 112. So, this means that the median New Hampshire household has just enough to qualify for their mortgage, plus 12% of their earnings. 

Median is median for a reason. I’m not telling you that all homeowners are overwhelmed with their mortgage, and there are so many other factors such as the cash and out of state buyer factor we’ve seen recently. However, all types of buyers are still showing up to open houses in droves and making offers that knowingly exceed the homes appraised value. All that I can say is … small town New Hampshire is where it’s at!  But we know that.