Could You Afford To Buy A Home In Your City Today?

Before we get into housing, remember last week when The Juice downplayed the dive stocks took on Monday, August 5th?

Since the close on 8/5, here’s how things look with the most-searched stocks in Trackstar and the equally-as-popular S&P 500—

• The SPDR S&P 500 ETF (SPY) is up 5.1%
• Nvidia (NVDA) is up 17.6%
• Tesla (TSLA) is up 1.3%
• Apple (AAPL) is up 6.1% 
• Amazon.com (AMZN) is up 5.6%
• Microsoft (MSFT) is up 5.5%

That’s as of Wednesday’s (8/14) close. 

Apple paid a $0.25 per share dividend this past Monday. Dividend reinvestment, baby. Another great reason to resist the urge to panic and stay the long-term course. Days like August 5, 2024 (which we won’t even end solemnly referring to by date) represent mere blips on the radar screen of time. 

Anyhow, we sometimes piggyback the stock market with housing because we like to be extra on top of things during particularly interesting times with equities. But also because the juxtaposition is striking.

Despite the fear and volatility that struck early last week, The Juice thinks stocks are anything but a mess. We expect the strong stocks of the last little while to stay strong at the same time as dividend payers rally in response to interest rates coming down. Even if we go into a recession, we don’t expect the leading names (see above) to suffer much, if at all. 

Meanwhile, the housing market is in crisis. It is an absolute mess, if not an unmitigated disaster. 

One look at the numbers on affordability — or lack thereof — makes clear a position we have held for quite some time: 

Even as rates come down and if, in your market, housing prices dip, this doesn’t make homeownership affordable. It remains out of reach for millions of Americans. 

As rates come down, expect prices to skyrocket and bidding wars to return. 

So, if you have a choice or, more so, if you can only do one or the other, invest in the freaking stock market. Of course, you do you, but this is the advice The Juice would give to our kids. 

Stretching to get into a house is akin to tying yourself to a financial ball and chain these days. As if only saving for that potentially futile purpose. 

Putting your extra cash in the market is a real step toward building a sustainable financial future.

Put another way — unless you’re already loaded or already a homeowner (either regretting the decision or basking in the glow of, say, a sub-5% mortgage interest rate), buying a home is quite possibly out of reach for you right now and about to get even further out of reach. 

So, don’t invite money stress. Put your excess cash in savings and the stock market. This cocktail of cash security and long-term wealth building beats the living hell out of living to work so you can burn both ends of your budget just to be a homeowner. That version of the American dream is dead. 

If you need proof, look no further than a tool The Juice has been playing with all week from the Atlanta branch of The Federal Reserve. 

When you forward the link to your friends, be sure to tell them you saw in The Juice. Better yet, forward them this email and ask them to subscribe to our newsletter for free. 

At the same time, we would love your answer to today’s question: Could You Afford To Buy A Home In Your City Today?

The Atlanta Fed’s tool monitors housing affordability. It’s kind of (not haha) funny to note that housing hasn’t been this unaffordable since October, 2023. Stretching the timeline out further, it’s more telling to say that the last time in recent memory housing has been as unaffordable as it has been over the last year was the summer of 2006. 

The Atlanta Fed looks at the median home price, median income in a geographic area, mortgage interest rates, the typical monthly payment and the percentage of the median income required to make that payment. 

So, a lower number means housing is less affordable. 

• In July of 2006, the index read 72. 
  • At the time, the median home nationally cost $228,667 and the median income nationally was $48,951. 
  • The interest rate was a robust 6.8% for a typical monthly payment of $1,700 or 42% of the median income. 

That data represents a bad time for affordability. 

• In 2012 and 2013, the index peaked at a solid 113 several times. 
• For example, the index read 113 in February 2012. 
  • At the time, the median home nationally cost $180,300 and the median income nationally was $51,039. 
  • The interest rate was a robust 3.9% for a typical monthly payment of $1,131 or 26.8% of the median income. 

That data represents a good time for affordability. 

• As of May, 2024, the index read 68. 
  • The median price was $383,269 and the median income was $81,385. 
  • The interest rate was 7.1% for a typical monthly payment of $2,977 or 43.9% of the median income. 

The Bottom Line: There’s no need to editorialize (much)! The Juice has made it more than clear how we feel about housing. Looking at how the data cycled over time (you can see it more strikingly at the Fed’s site) is fascinating enough. 

This said, between February 2012 and May 2024, the cost of the typical home in America increased by more than 112.5%. Meanwhile, the median income went up about 59.4%. You don’t need a math degree to make sense of that noise. 

So, it’s your turn to editorialize. Feel free to use the feedback link at the bottom of the page to give us your opinion.

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