Affordability on the rise
Thanks to decreasing mortgage rates, consumer homebuying power is up. In fact, according to new data, it actually made its biggest monthly jump in more than five years.Verify your new rate (Feb 21st, 2020)
A leg up for homebuyers
Though home prices may still be rising — just more slowly than in recent years — it appears homebuying power is finally on the rise. According to the Real House Price Index (RHPI) from First American, consumer homebuying power was up 3.1 percent in December — the largest monthly gain in over five years.
According to First American Chief Economist Mark Fleming, buyers have lower mortgage rates to thank for it.
“While housing affordability in 2018 fared poorly in comparison to 2017, decreasing 11.8 percent in December compared with a year earlier, the year finished strong in December thanks to declining mortgage rates,” Fleming said. “Mortgage rates in December fell 0.23 percentage points compared with the previous month and household income increased 0.4 percent.”
All in all, Fleming said that December’s dip in rates equated to a $10,000-boost in homebuying power.
Lower “real” home prices
According to the RHPI, which factors in incomes, interest rate changes, home prices and other factors, “real” house prices actually dropped 2.4 percent in December. They’re down 37.2 percent since their pre-recession peak.
In addition to lower rates, rising incomes are a big part of the equation as well, Fleming said.
“Housing affordability is a function of three economic drivers: nominal house prices, household income and mortgage rates,” Fleming said. “When incomes rise, consumer house-buying power increases. Declining mortgage rates or declining nominal house prices also increase consumer house-buying power.”
The average household income increased 3.1 percent year-over-year and 55 percent since the start of 2000. Hourly wages also grew 3.5 percent over the year.Verify your new rate (Feb 21st, 2020)
Get today’s mortgage rates
Want to take advantage of this increasing homebuying power? Then shop around and see what mortgage rates you qualify for today.Verify your new rate (Feb 21st, 2020)