Check this out. The median sale price for a single-family home increased nearly +6% this last year. The principal-and-interest mortgage payment on that median priced home increased +13% this past year.
More specifically, the US median sale price in July 2018 was $230,411, up 5.8% y/y. The typical mortgage payment increased +13.1% due to a nearly +0.6 percentage point rise in interest rates over a one-year period.
One way to measure how inflation, mortgage rates and home prices impact affordability over time is to use Freddie Mac’s “typical mortgage payment.” This typical payment would be Freddie Mac’s average rate on a 30-year fixed loan with a 20% down payment WITHOUT taxes and insurance.
A consensus forecast suggests that the median sale price for a single-family home will rise approximately +4.3% between July 2018 and July 2019, according to the CoreLogic Home Price Index Forecast. If correct, an inflation-adjusted typical mortgage payment would rise from $937/month in July 2018 to $1,003 in July 2019. In nominal or fixed monetary terms, a typical mortgage payment y/y gain would be +9.7% during this one-year time frame.
Compare the projected increases in single-family home median sale prices of +4.3% and mortgage payments of +9.7% to projected increases in real disposable income. IHS Markit, a data powerhouse, calls for real disposable income to rise +2.5% over next year.
Hmmmph. No wonder well-respected housing experts say that the US housing market has an ACUTE affordability problem.
