3 Factors To Consider With Housing Affordability Still Being High, Yet For Home Buying The Prices Are Still Increasing


Incomes, Interest Rates Have Kept Affordability In Check

Despite rising home prices, American housing is actually reasonably affordable. Three factors to consider with housing affordability still being high, yet for home buying the prices are still increasing. NSH Mortgage has the knowledge and tools to help you in finding out your housing affordability opportunities and with the rise in home prices.

According to the recent Real House Price Index from First American, today’s home buyers currently possess a historically high level of house purchasing power.


Affordability Crisis Has Been Overstated

Talk of an affordability crisis is over stated. In fact, consumer home buying power, the how much someone can buy based on average income, interest rate and home price, is actually up over the year.

Home buying power has risen by nearly a full percent from November 2016 to November 2017. In addition, even though real home prices increased only by 5% over the year, they are still 37.7% below their 2006 yearly peak. While they are also more than 16% below their 2000s yearly numbers. Furthermore, with incomes increasing rapidly, yet they are not able to keep pace with the rising home prices.

Forgotten to factor in the comparison of income growth and unadjusted home price growth is the change in household income. Which is not the only factor that influences how much home one can actually afford to buy. A consumer’s home buying power which is result of how much one can afford to buy, including by the changes in mortgage interest rates. Even if one’s income does not change, but interest rates go down home buying power increases. Additionally, because mortgage rates have decline since their historical averages, home buying power is up.

In fact, consumer home buying power has increased by 2.3 times higher than it was in the year 2000. It is also only 2.9% below the peak in July 2016. Thanks to the long run trend in mortgage interest rates going downwards from a peak of 18% in 1981. The housing market has benefited from consistently increasing home buying power. Home buyers today have been seen with historically high levels of home purchasing power. Actually, that is one important reason why, even as unadjusted home price growth has exceeded household income growth. Which starts the talk of an affordability crisis is overstated for now.


Most Affordable States

Year over year, real home prices dropped the most in Arkansas, where they fell 2.9% since November 2016. Maryland came in at No. 2, with prices dropping 1.5%, while Washington, D.C., came in third, with a dip of 0.5%.

Delaware saw the biggest jump in real home prices, with an increase of 12.4% over the year. Nevada and Missouri both notched above 10% gains, while New York and Washington saw jumps of 8% or more.

At the metro level, San Jose, California, has underwent the biggest increase in real prices (14%). Whereas, Pittsburgh saw the biggest drop. As well, real home prices in the city have decreased 2.5% over the year.

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