Homebuying power on the rise thanks to low rates and high incomes

Average buyer can afford a $391K home

American homebuying power has reached its second-highest point in the last 20 years. According to a new analysis, the average buyer can now afford a home priced as high as $391,037.

High homebuying power

New data from First American shows consumer homebuying power has hit $391,037 — its second-highest level in two decades.

That’s nearly $20,000 more than the 2018 average when the typical buyer could afford a home priced at $372,060.

In February, First American’s Real House Price Index showed homebuying power made its biggest jump in five years.

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Why the rise?

According to Odeta Kushi, deputy chief economist at First American, the increase is largely due to decreasing mortgage rates. Last year’s average mortgage rate was 4.54 percent. In the last week of March, the average rate was 4.06 percent, marking a .22 basis-point drop over the week — the biggest decline in more than 10 years.

“The mortgage rate-driven affordability surge has arrived just in time for the spring home-buying season. Home buyers have reacted positively to lower mortgage rates,” Kushi said. “When rates dipped at the end of March, mortgage applications surged nearly 19 percent for the week. While many of those mortgage applications were for refinances, up 39 percent from the previous week, there was also renewed interest in home buying.”

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Growing household incomes have also helped increase homebuying power. According to Kushi, the average household income sits at $65,400. That’s up from $61,372 in 2017.

“Rising affordability has already benefited home buyers and, if the lower rate environment persists, we’re in for a great spring home-buying season,” Kushi said.

Get today’s mortgage rates

Want to take advantage of this increased homebuying power? Then shop around and see what mortgage rates you qualify for today.