While the U.S. median sale price has risen by just under 6 percent over the past year, the principal-and-interest mortgage payment on the median-priced home has increased nearly 15 percent. Moreover, while the CoreLogic Home Price Index Forecast suggests U.S. home prices will rise 4.7 percent year over year in August 2019, some mortgage rate forecasts indicate the mortgage payments homebuyers will face by then will have risen by more than 11 percent.
One way to measure the impact of inflation, mortgage rates and home prices on affordability over time is to use what we call the “typical mortgage payment.” It’s a mortgage-rate-adjusted monthly payment based on each month’s U.S. median home sale price. It is calculated using Freddie Mac’s average rate on a 30-year fixed-rate mortgage with a 20 percent down payment. It does not include taxes or insurance. The typical mortgage payment is a good proxy for affordability because it shows the monthly amount that a borrower would have to qualify for to get a mortgage to buy the median-priced U.S. home.
Article by Andrew LePage: Core Logic
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