Despite rising home prices, American housing is actually quite affordable – and now is really a good time to make that purchase.
According to the latest Real House Price Index from First American Title, today’s home buyers have “historically high levels of house-purchasing power.”
Read the entire article from Amy Yale at the Mortgage Reports here.
Affordability crisis ‘over-stated’
According to Mark Fleming, First American’s chief economist, “talk of an affordability crisis is over-stated.” In fact, consumer house-buying power – how much home someone can buy based on average income, interest rate and home price – is actually up over the year.
And though real home prices increased 5 percent over the year, they’re still 37.7 percent below their 2006 peak. They’re also more than 16 percent below 2000’s numbers.
Because mortgage rates are lower than historical averages, home-buying power is up, according to First American’s Fleming.
“In fact, consumer house-buying power is 2.3 times higher than it was in 2000, almost two decades ago,” he said. “It’s also only 2.9 percent below the peak in July 2016. Because the long-run trend in mortgage interest rates has been downward, from a peak of 18 percent in 1981, the housing market has benefited from consistently increasing house-buying power”
He continues, “Home buyers today have historically high levels of house-purchasing power, and that’s one important reason why, even as unadjusted house price growth exceeds household income growth, the talk of an affordability crisis is over-stated for now.”
One of the great underlying opportunities today is that buying a home is considerably cheaper than renting. Renters interested in reducing expenses and collecting tax benefits should absolutely talk to a mortgage lender prior to signing that next rental contract.
Contact me for more information, as it would be my pleasure to help!