According to CoreLogic, median home prices rose nationally just over +5% year over year in October 2019. Principal and interest mortgage payments on those median priced homes rose +17% in October 2018.

The US median sale price on a home in October 2018 was $218.733, a +5.2% y/y gain. The typical mortgage payment increased +17.0% due to a 0.9%-point rise in mortgage interest rates over the one-year period.

One way to measure the impact of inflation, mortgage rates and home prices on affordability is to use the “typical mortgage payment.” This mortgage rate adjusted payment does NOT include taxes or insurance. This payment shows the monthly amount a borrower would have to qualify for in order to get approved for a mortgage on a median priced home for a Freddie Mac average on a 30-year fixed rate with a 20% down payment.

Both home prices and mortgage rate are anticipated to rise at a slower pace in 2019. The CoreLogic Home Price Index forecasts a +4.8% annual gain in nominal or non-inflation adjusted home prices by October 2019.   Forecasts from Freddie Mac, Fannie Mae, the Mortgage Bankers Association, the National Association of REALTORS®, the National Association of Home Builders and the IHS Markit forecast a 0.2%-point gain in mortgage rates by October 2019.

Based on all the above projections of home prices and mortgage rates, the “typical mortgage payment” on a median priced home that was $918 in October 2018 would be $963 by October 2019, a +4.9% y/y gain.

Compare the nominal, non-inflation adjusted typical mortgage payments below:

  • January 2006 – $1,275 with a 6.7% mortgage rate
  • October 2018 – $918 with a 4.8% mortgage rate
  • October 2019 – $963 with a 4.9% mortgage rate

According to the HIS Markit Forecast, real disposable income is projected to rise just under 3% over the next year. This means that homebuyers will see a larger portion of their incomes going to mortgage payments by October 2019.