Curve

Home buying power still high, despite rising prices and rates

Aly J. Yale
The Mortgage Reports contributor

Are home prices really that high?

It might seem like home prices just keep rising, but according to a new analysis, today’s housing is actually still pretty affordable. “Real” home prices—those adjusted for income and interests rate changes—are currently 32.5 percent below their housing boom peak from 2006.

Verify your new rate (Jun 24th, 2019)

Home buyers still hold the power

According to the latest First American Real House Price Index, which aims to measure overall housing affordability by considering changes in income, interest rate and actual home prices, consumer home buying power is still strong.

“While unadjusted house prices have been on the rise since the end of 2011, nearly a seven-year run, consumer house-buying power has also increased by 14.3 percent over the same period,” said Mark Fleming, First American’s chief economist. “House-buying power, how much one can buy based on changes in income and interest rates, has benefited from a decline in mortgage rates since 2011, and the more recent slow, but steady growth of household income.”

Where home prices haven’t peaked: The nation’s safest bets to buy—for now

Buying power is actually up significantly from 2011, according to Fleming.

“Between the peak of unadjusted house prices in 2011 and today, the 30-year, fixed-rate mortgage has fallen from 5.0 percent to 4.4 percent in March,” he said. “Over the same period, household income has increased 19 percent. Lower mortgage rates and higher income levels mean significantly higher house-buying power today than at the end of 2011.”

Home prices rise—except in these states

The real story on home prices

Overall, “real” home prices “aren’t even close to their historical peak,” according to Fleming. In fact, they’re currently 32.5 percent below July 2006’s prices and 9 percent lower than in January 2000.

Real home prices in New Jersey actually dropped, according to First American’s index. The state saw prices decrease 0.7 percent over the last year.

At the metro level, Pittsburgh also experienced a decrease in real home prices year-over-year. They’ve dipped 1.2 percent since April 2017.

Verify your new rate (Jun 24th, 2019)

Buying a home is still possible

Don’t let sticker prices fool you. American home buying power is still high. Want to get in on the market? Shop around and see what mortgage rates you qualify for today.

Verify your new rate (Jun 24th, 2019)