Despite July 2019 being the 87th consecutive month of annual home price growth, July 2019 was also the first time in 16 months that affordability improved, according to Black Knight. How could this be? Falling interest rates helped counterbalance rising home prices.
A recent report by First American agreed. This report showed that consumer house-buying power in July 2019 was at its highest point in two decades. Unadjusted home prices rose +6.3% above that of the housing boom peak and consumer buying power increased +3.3% between May 2019 and June 2019 which then increased consumer buying power hit +12.2% year/year.
According to First American, this means that home prices in July 2019 were -41.3% below the 2006 peak and -18% below prices in 2000.
According to Mark Fleming, chief economist with First American, “The 30-year fixed-rate mortgage fell by -.08%% points and household income increased by +2.4% in June 2019, compared with June 2018. When household income rises, consumer house-buying power increases. Dec lining mortgage rates have a similar impact on affordability, so in June 2019 home buyers received a double shot of house-buying power to jolt affordability in their favor nationally.”
The net effect here? Household income growth increased consumer house-buying power by $8,600 since June 2018. And, consumer house-buying increased by $44,000 in June 2019 compared to June 2018…the highest, according to First American’s Fleming, it’s been since the company began tracking consumer-buying power in 1991.
More good news also came from CoreLogic’s latest Home Price Index and Home Price Index Forecast. This forecast, combined with the average among six of its mortgage rate forecasts, indicated that the average +4.6% gains from June 2019 through May 2020 over this same 12-month period will average a decline of -3.3%. And, for the remaining months of this year, CoreLogic forecasts that declines will average -5.9% based upon the expectation that mortgage rates will be almost -0.7% points lower during June 2019-May 2020 than the year earlier.
CoreLogic indicated that in May 2019, the typical mortgage payment (principal and interest) was -30.3% lower than the all-time peak of $1,286 in June 2006. Why? Because the average mortgage rate in June 2006 was approximately 6.7% compared with an average rate of approximately 4.1% in May 2019.