Homebuying power is up, nearing all-time highs

Aly J. Yale
The Mortgage Reports contributor

Buyers gain ground

The latest home sales data might not reflect it, but according to a new report, consumer homebuying power is almost at a record high. In fact, if mortgage rates decrease just 10 points, Americans will have the most buying power since 2000.

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Homebuying power could grow more by year’s end

According to the latest Real House Price Index from title insurance firm First American, consumer homebuying power is strong. Total buying power increased 1.3 percent between April and May and more than 9 percent over the year. 

Mark Fleming, First American’s chief economist, says homebuying power could rise even more by year’s end, thanks to potentially lower mortgage rates.

“Fannie Mae forecasts that the 30-year, fixed-rate mortgage will fall from its July 2019 rate of 3.8 percent to 3.7 percent for the remainder of the year, boosting affordability for homebuyers,” Fleming explained. “Shifts in income and interest rates either increase or decrease consumer house-buying power or affordability. When incomes rise and/or mortgage rates fall, consumer house-buying power increases.”

Housing affordability jumps for the first time since 2016

Where “real” home prices have dropped the most

Though unadjusted home prices are currently 3.2 percent over their 2006 peak, prices adjusted for income trends and interest rates — dubbed “real house prices” by First American — are actually 41.1 percent below it. 

They dropped the most in North Dakota, where real house prices decreased 8.5 percent over the year. Other states with significant drops were Wyoming (down 8 percent), California (-7.1 percent), Arkansas (-5.8 percent) and New Mexico (-5.7 percent). At the metro level, San Jose, California, had the biggest decrease at -13.9 percent.

Home affordability is rising — especially in these 5 cities

Wisconsin saw the biggest jumps in real house prices, logging a 1.5 percent increase for the year. Maryland and New Hampshire tied for second, with an increase of 0.2 percent. Metro-wise, Providence, Rhode Island, saw the biggest uptick with a 2.2 percent jump. 

Verify your new rate (May 30th, 2020)

Get today’s mortgage rates

Looking to capitalize on your increase homebuying power? Then shop around and see what mortgage rates you qualify for today. 

Verify your new rate (May 30th, 2020)