Over this past year, the median sale price of homes in the US rose 5.7%. In this same period, the principal–and–interest mortgage payment (excluding taxes and insurance) on a median priced home increased nearly +15%.
The CoreLogic Home Price Index suggests that prices will increase +4.7% y/y by August 2019. Mortgage rate experts are forecasting a +11% jump in buyers’ mortgage payments by August 2019.
Clearly, there is a big difference between 2018’s home price growth of 5.7% and mortgage payment growth of 15.7%. And, there’s a big difference between CoreLogic’s 2019 forecast home price growth of +4.7% and 2019’s forecast mortgage payment growth of +11%.
What does this mean in terms of dollars and sense to homebuyers in 2018 and homebuyers in 2019?
- In August 2018, a homebuyer with a 20% down payment for a median priced home on a 30-year fixed mortgage would pay $922/month.
- In August 2019, a homebuyer with a 20% down payment for a median priced home on a 30-year fixed mortgage would pay $1,000/month.
Along with CoreLogic’s home price and mortgage forecasts for 2019, the IHS Markit forecast calls for real disposable income to rise approximately +2.5% over 2019. Obviously, homebuyers would see a larger chunk of their incomes going to mortgage payments next year compared to this year.
How do these mortgage payments in 2018 and 2019 compare to all-time peak mortgage payments in 2006?
- June 2006 – $1,283
- August 2018 – $922
- August 2019 – $1,000
Today’s mortgage payments in 2018 are -28.1% below all-time peak mortgage payments in June 2006. Interest rates were approximately 6.7% in 2006; interest rates were 4.6% in August 2018.
To complete this circle, inflation-adjusted median sale prices were $248,980 in June 2006 compared to $226,155 in August 2018.