In a phrase he popularized if not originated, Mark Twain warned the public of the dangerous trio of “lies, damned lies and statistics.” But sometimes a certain specific statistic stands out to be worthy of passing along.
New data from the Virginia Realtors trade group, reported in this week’s edition, show that between May 2020 and May 2022, the estimated monthly payment needed to purchase a median-priced home in Virginia rose a whopping 71 percent. Not 7.1 percent, but 71 percent.
Blame the double-whammy of ongoing increases to home prices coupled with interest rates that, while still moderate (perhaps even low-ish) by historic norms are significantly higher than they have been in recent years when they were kept artificially low by the Federal Reserve.
As a result, Virginia Realtors notes in new figures, the estimated family income needed to afford a typical home in the commonwealth is up from $56,000 annually two years back to just under $96,000 today. While many Northern Virginians may say “what’s the problem with that?”, jaws will be dropping across the commonwealth.
Yes, incomes are up for many, but are being eaten away by the same inflationary pressures that are affecting the housing market. And count yourself extremely fortunate if your household income has been boosted 71 percent over the past 24 months, because you’re part of a small contingent, indeed.
Having lived through a few real-estate recessions in our day, we can at least give thanks that lending standards were tightened up in the wake of the 2008-09 debacle, so it’s unlikely we will see a housing freefall. Yet something’s going to have to give – interest rates are likely headed higher, putting owner-occupied housing further out of reach of many and thus eliminating a pool of buyers needed to keep the market churning. And if Arlington and other regional leaders think “Missing Middle” is the solution, well, we’d wager against it.
Buckle up and hunker down.