The truth behind home affordability in Orange County over the years.

Are you wondering why it’s so hard to afford a home now when rates are at 7% when people could easily afford homes in 1980 with rates around 14%? This is an interesting conundrum, but there are some important statistics that show how this happens. 

If you look at the graph at about 0:20 in the video above, you can see the interest rates, sales prices, monthly income, and percentages of income that payments would be, all compared from 1980 to today. For example, in 1980, rates were up to 13.75%, the median sales price was $108,000, the median household income was $22,000, and mortgage payments were 55% of people’s income on average. 

In 1990, rates went down to 10%, and the average income went up to $41,000, so the payment percentage went down to 50%. In 2000, this gap grew even further, with an interest rate of 8% and the percentage of income going down to 40%. 

However, things spiked back up in 2006 when home prices jumped. Since the median sales price was now $732,500, the percentage of income went up to 63%. Then came 2012 and 2020, which were some of the best years. In 2012, the interest rate was down to 3.66%, the median sales price was down to $543,000, the average income was up to $72,000, and the percentage was down to 33%. Trends were similar in 2020 and 2021. 

“Affording a home will require patience.”

The biggest adjustment, however, is when you look at this year’s numbers. The average interest rate in Orange County is up to 6.81%, the median sales price is up to $1,256,500, the median household income is $109,000, and the percentage of income that is taken up by mortgage payments is up to 72%, which is the worst we’ve seen. 

This data shows that people’s struggles with affordability are very valid. If you’re an entrepreneur, this might not apply to you, but for anyone who’s on a fixed income, you likely know this struggle too well. 

To combat this, there are a few strategies that I recommend. The first is to use a budget to save more. Then find a side hustle to bring in more income. After that, you’ll just need to be patient. If you can’t afford to buy a home, you may just need to wait for a little bit while putting in the work. 

If you have any questions about this or need help buying or selling a home in this crazy market, don’t hesitate to reach out. You can call or email us anytime, and we would be happy to help you!