CoreLogic tells us that a “typical mortgage payment” is the amount a borrower would have to qualify for to get a purchase mortgage for a median-priced home. It’s also a good ballpark figure to determine affordability.
Due to lower interest rates, CoreLogic also tells us that the annual growth in buyers’ mortgage payments is now below that of home prices. This now lower interest reality is a reversing trend from last year when median sale prices rose +4% y/y while principal and interest payments on a median priced home (typical mortgage payment) increased +17%.
As of March 2019, declining mortgage rates dropped below that of home prices. Some interest rate and price forecasts indicate that buyers an only slightly higher, or even lower rates and prices. Such a reality could actually help home sales.
The median sale price for a single-family house in March 2019 was $222,482 and interest rates were +3.5% y/y, down from 8% y/y in March 2018.
CoreLogic’s Home Price Index (HPI) and its HPI Forecast indicate that annual gains in home prices each month from April 2019 through March 2020 will average 4.3%. This forecast combined with the average of six mortgage rate forecasts (Freddie Mac, Fannie Mae, National Association of REALTORS, Mortgage Bankers’ Association, National Association of Home Builders and IHS Markit) “…suggests that over April 2019 through March 2020, the annual change in the typical mortgage payment will average out to +0.9%.”
CoreLogic’s HPI predicts that the median sale price on a single-family home will rise +1.8% over the year ending in March 2020 and that the typical mortgage payment would rise form $878 in March 2019 to $910 by March 2020, a +3.6% y/y gain.
Now, compare the all-time peak of typical mortgage payment of 6.7% at $1,281 on a median sale price of $248,066 in June 2006 to today’s typical mortgage payment of 4.3% at $878 on a median sale price of $222,482 in March 2019!
Quite a difference, right?