econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 09 January 2018

Homebuyers'

from CoreLogic

-- this post authored by Andrew LePage

The U.S. housing market has logged annual home-price gains over 6 percent in recent months, heightening affordability concerns. But price gains are only part of the challenge for homebuyers, who face mortgage payments that have risen about 11 percent over the past year because of higher mortgage rates.

One way to measure the impact of inflation, mortgage rates and home prices on affordability over time is to use something we call the “typical mortgage payment." It’s a mortgage-rate-adjusted monthly payment based on each month’s U.S. median home sale price. It is calculated using Freddie Mac’s average rate on a 30-year fixed-rate mortgage with a 20 percent down payment. It does not include taxes or insurance. The typical mortgage payment is a good proxy for affordability because it shows the monthly amount that a borrower would have to qualify for in order to get a mortgage to buy the median-priced U.S. home. When adjusted for inflation, the typical mortgage payment also puts current payments in the proper historical context.

The change in the typical mortgage payment over the past year illustrates how it can be misleading to simply focus on the rise in home prices when assessing affordability. For example, in September this year the U.S. median sale price was 6.4 percent higher than a year earlier in nominal terms, but the typical mortgage payment was up 11.1 percent because mortgage rates had increased by nearly 0.4 percentage points over that 12-month period.

Figure 1 shows that while the inflation-adjusted typical mortgage payment has trended higher in recent years, in September 2017 it remained 36.8 percent below the all-time peak of $1,257 in June 2006. That’s because the average mortgage rate back in June 2006 was about 6.7 percent, about double the average rate of 3.81 percent this September, and the inflation-adjusted median sale price in June 2006 was $244,050 (or $199,900 in 2006 dollars), compared with a median of $212,740 in September 2017.

Forecasts from IHS Markit call for inflation and income to rise gradually over the next year, while a consensus forecast [1] suggests mortgage rates will gradually rise by about 0.6 basis points between September 2017 and September 2018. The CoreLogic Home Price Index forecast suggests the median sale price will rise about 3.0 percent in real terms over the same period. Based on these projections, the inflation-adjusted typical mortgage payment would rise from $794 this September to $883 by September 2018, an 11.2 percent year-over-year gain (Figure 2). (In nominal terms the typical mortgage payment would rise 13.2 percent over the next year.) Real disposable income is projected to rise by around 2.6 percent over the same period, meaning next year’s homebuyers would see a larger chunk of their incomes devoted to mortgage payments.

Footnotes

[1] Based on the average mortgage rate forecast from Freddie Mac, Fannie Mae, Mortgage Bankers Association, National Association of Realtors, National Association of Home Builders and IHS Markit.

© 2017 CoreLogic, Inc. All rights reserved.

Source

http://www.corelogic.com/blog/authors/andrew-lepage/2017/12/homebuyers-typical-mortgage-payment-up-11-percent-year-over-year.aspx

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical News Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.




Econintersect Contributors








search_box
Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.







Keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government




























 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2018 Econintersect LLC - all rights reserved