Watching For market indicators: While the masses are waiting for the bottom to hit the seasoned investors are watching for the indicators that tell them the time is right.
There are many indicators to watch for so let’s take a look at them one by one.
Affordability index: Many refer to this as a market being Undervalued or Overvalued. What does this all mean? Let’s break it down. For this point of reference we will look at median income and median home price. Most lenders state that a housing expense should be roughly 28% of your Household Gross income: So you want to look at the median gross income in your market place.Then you want to look for the median home price.
Does the median income support the value of the median home price?
Median income in your market is $40K per year. Or $3,333 per month. Based on today’s interest rate, taxes, insurance and principle payment of the home the annual expense should be roughly 28% or $933 per month.
Taxes and insurance for your market needs to be factored into the equation and will very by location. The combination of these expenses along with principle and interest payments should not exceed the $933 expense. If this total is higher than $933 your housing market may be over valued. By Contrast if your Total is less than $933 you market may be undervalued. This is key indicator that now may be a great time to buy.
To Sum it up: A key indicator is the Affordability index (the undervalued markets) such as
Fort Worth Texas with an affordability index of 16%
Oklahoma City with an affordability index of 19%
Atlanta Georgia with an affordability index of 19%
Indianapolis Ind. With an affordability index of 16%
What is in store for next week: (Job Growth):