July 12, 2018 rummy 0Comment

It is given that purchasing power is always desired. But with all the current trends in the real estate industry, how true is it that many believe that house-buying power is near historic levels?

We keep hearing that home affordability is approaching crisis levels. While this may be true in a few metros across the country, housing affordability is not a challenge in the clear majority of the country. In their most recent Real House Price Index, First American reported that consumer “house-buying power” is at “near-historic levels.”
Their index is based on three components:

  1. Median Household Income
  2. Mortgage Interest Rates
  3. Home Prices

The report explains:

 

Combining these three crucial pieces of the home purchasing process, First American created an index delineating the actual home-buying power that consumers have had dating back to 1991.

Here is a graph comparing First American‘s consumer house-buying power (blue area) to the actual median home price that year from the National Association of Realtors (yellow line).

Consumer house-buyer power has been greater than the actual price of a home since 1991. And, the spread is larger over the last decade.

Even though home prices are increasing rapidly and are now close to the values last seen a decade ago, the actual affordability of a home is much better now. As Chief Economist Mark Fleming explains in the report:

Reference:https://bit.ly/2zBfpC0

 

www.NYREEX.com

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