Announcer:
4 Your Money is brought to you by NelsonCorp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for 4 Your Money. We’re joined by David Nelson, CEO of NelsonCorp Wealth Management. Welcome back David.
David Nelson:
Thanks for the invite. Appreciate it.
Brandy Auterson-Hurst:
So buying a new home has gotten harder in recent years for many Americans. So what are some of the things you’re looking at in the housing market?
David Nelson:
So when we talk about the housing market, we’re looking at the state of it today, and basically there’s two things that just absolutely jump out at you. The first of which is the high price of homes. As crazy as that sounds, that’s one of the variables. The other is the affordability index. And the chart that I brought along today kind of walks us through what is that exactly and what does it mean as far as to folks out there.
So we’re illustrating exactly as far as this concept. And the concept is if you look at the blue line, it’s going to show you the Case-Shiller Home Index, which basically is looking at home prices and how they’ve changed since the ’90s. The red line is looking at the fixed index housing affordability index, which is a measure of how the average American family, as far as can afford the mortgage.
As you can see, the gap has really widened significantly over the past decade with home prices basically near record highs and the affordability near record lows. And this can mostly be explained by the low supply of housing over the last decade, and higher mortgage rates. And you put the two together, it’s been a tough clip as far as for many individuals out there.
Brandy Auterson-Hurst:
Yeah, it has been tough. So do you see any ways for this gap to get any smaller in the future?
David Nelson:
I think there’s some really good news, and it centers around the supply, which has increased 22% as far as over the last year. Also, inflation is down, and that should drag down interest rates, and that combination hopefully will be very helpful for folks looking to buy.
Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal.
Indices mentioned are unmanaged and cannot be invested into directly.
This video includes a paid appearance.