Did you hear the news? There’s no housing crisis after all! In fact, we have never had it so good, with homes more affordable than they have been in 40 years, not just in Peoria and Pittsburgh, but in Boston, San Francisco and New York!

That’s the rather astounding claim made by Trulia in a new report that uses today’s historically low interest rates to argue that homes are more affordable now they were 30 or 40 years ago.

And it surely comes as a surprise to the growing number of frustrated homebuyers struggling to land something – anything – and not just in hot markets like Boston and San Fran, but increasingly in other cities across the country.

Scott Van Voorhis

What’s my beef with Trulia’s Pollyannaish-take on today’s real estate market? Where do I start? Trulia’s report screams marketing all over it, an attempt to give an unsubtle push to potential buyers worried, for good reason, about soaring home prices.

Maybe this is not surprising, given that Trulia is a giant online and mobile sales platform for the real estate industry.

While Trulia churns out lots of reports and blog posts purporting to offer relatively objective insight into current real estate market conditions and trends, its latest effort, “Not Your Father’s Housing Market,” stretches credulity. The report skews some key numbers to make the case that housing is more affordable now than it was decades ago when the Greatest Generation and up-and-coming Boomers dominated the market.

Sure, home prices – adjusted for inflation – have shot up 62 percent, while incomes have grown less than half that rate, or so Trulia argues. But the plunge in interest rates – from 16 percent in the 1980s to under 4 percent now – has been so dramatic as to cancel out price and wage trends and make housing more affordable, not less, Trulia concludes.

“Nationally, homes are just about the most affordable they’ve been in the last 40 years,” the report contends.

Detached from Reality

The comparison reeks of cherry picking. Trulia juxtaposes the early 1980s rate spike to today’s historically low numbers. However, rates were significantly lower in the 1970s and in the years after, with many homeowners refinancing in the late ’80s and ’90s to take advantage of the declines. It is unlikely any buyer with half a brain wound up stuck with a 16 percent rate for decades.

Moreover, the model on which Trulia bases its claim is fatally flawed, as it is based on a theoretical buyer who forks over a 20 percent down payment to the bank.

This is significant. By putting 20 percent down, Trulia’s fortunate buyer doesn’t have to shell out hundreds of dollars a month for mortgage insurance. And while it’s not clear the exact interest rate Trulia used in its calculations, anyone putting 20 percent down is going to get the lowest rate in the current market.

But this scenario is completely detached from the real estate market reality most middle-class buyers face today. Few people have the financial wherewithal to put down 20 percent, especially in high-cost markets like Boston, where that could easily mean $100,000 on a $500,000 home or condominium.

The average down payment was 11 percent in 2016, dropping to 8 percent for buyers under 35, according to the National Association of Realtors.

In reality, that means the average buyer is not only paying private mortgage insurance, she is also paying a higher mortgage rate than the theoretical buyer on Planet Trulia who is thrilled, just thrilled, with how affordable housing has become.

Trulia’s calculations also leave out some other key factors that have made buying a house a lot less affordable and a lot more complicated than it was circa 1980.

For one, Trulia did not take into account consumer debt, which has grown substantially in the past few decades. The cost of college tuition and health care, both relatively affordable back in 1980, have gone wild in the intervening years, far outstripping middle-class incomes, while credit card debt has ballooned as families have struggled to cope.

It’s a big deal. A survey of housing affordability in 2014, before the recent spike in prices, gave Boston a “D.”  Unlike Trulia’s recent report, it did include consumer debt. And this was before the latest round of price increases.

Nor are buyers, or at least middle-class ones, as well off as Trulia seems to believe, as it points to a 27 percent rise in median income nationally since 1980. That number, however, includes hugely disproportionate gains by the top 5 percent; middle-class incomes have barely budged at all during that time.

Fake News Hurts Us All

Housing affordability is far more complicated than a measure of calculating interest rates under ideal conditions.

There’s a very good argument that middle-class buyers in highly competitive markets like Boston are paying more for less – maybe in square footage and certainly in quality, location and condition – than they were 40 years ago.

Simply put, there were a lot more homes on the market in 1980s, with three to four times as many new homes being built each year in Massachusetts during the Reagan years compared to now.

For first-time buyers trying to break into the current market, the idea of choice is an alien concept, with too many buyers forced to battle it out in multiple bid situations and settle for what they can get.

Trulia’s odd take on the housing market is probably nothing more than an attempt to drive traffic with a silly, counterintuitive take on the state of the housing market. But nonsense isn’t always harmless. By pushing the fallacious argument that buyers are better off today, Trulia undercuts the growing consensus, both in the Boston area and across the country, that more housing of all types is needed to help bring down prices and rents.

After all, if housing really is affordable, not just in Omaha, but even in such hotspots like Boston and San Francisco, why get all worked up about zoning and declining building permits? Sorry Trulia, but today’s housing market is anything but affordable, especially in Greater Boston.

Scott Van Voorhis is Banker & Tradesman’s columnist; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.