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.