Almaden Valley Homes For Sale | House-Buying Power at Near-Historic Levels

 

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Today I would like to speak to you about House-Buying Power at Near-Historic Levels

 

We keep hearing that home affordability is approaching crisis levels. While this may be true in a few metros across the country, housing affordability is not a challenge in the clear majority of the country. In their most recent Real House Price Index, First American reported that consumer “house-buying power” is at “near-historic levels.”

Their index is based on three components:

 1. Median Household Income

 2. Mortgage Interest Rates

 3. Home Prices

The report explains:

“Changing incomes and interest rates either increase or decrease consumer house-buying power or affordability. When incomes rise and/or mortgage rates fall, consumer house-buying power increases.”

Combining these three crucial pieces of the home purchasing process, First American created an index delineating the actual home-buying power that consumers have had dating back to 1991.

Here is a graph comparing First American’s consumer house-buying power (blue area) to the actual median home price that year from the National Association of Realtors (yellow line).

Consumer house-buyer power has been greater than the actual price of a home since 1991. And, the spread is larger over the last decade.

 

Bottom Line

Even though home prices are increasing rapidly and are now close to the values last seen a decade ago, the actual affordability of a home is much better now. As Chief Economist Mark Fleming explains in the report:

“Though unadjusted house prices have risen to record highs, consumer house-buying power stands at near-historic levels, as well, signaling that real house prices are not even close to their historical peak.”

 

Source.. KCM Don Orason Blog

 

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Don Orason, Owner — Silicon Valley Real Estate Team   

www.siliconvalleyrealestateteam.com