By Jim Merrion
In the third quarter of 2005, the affordability ratio in the metro area for the median priced four-bedroom, 2 ½-bath home was 81, while currently the ratio is 134.5, a 66 percent increase in affordability. (A score of 100 is considered “affordable” and scores over 100 indicate greater affordability.)
In the third quarter of this year, median family income as estimated by the U.S. Department of Housing and Urban Development was $75,100 in the metro area, and the median price for the same four-bedroom, 2 ½-bath home was $288,250, or 20 percent less than five years earlier. The average interest rate on a 30-year fixed-rate loan had declined to 4.46 percent. The monthly payment was $1,162.94, delivering a savings of $533 a month.
The difference between the monthly payment required in 2005 and that needed today to buy a similar home is absolutely striking and makes it clear why the current market is a remarkable buying opportunity.
Affordability also has improved in the condominium market. During the third quarter of this year the median price of two-bedroom, two-bath condo units in the metro Chicago real estate market was $205,500, and the affordability ratio was 189. In contrast, the median price for the same type of unit in the third quarter of 2005 was $265,000 and the affordability ratio was 125.
Jim Merrion is the regional director of RE/MAX Northern Illinois. For more information, visit illinoisproperty.com.