House-Buying Power at Near-Historic Levels

You have more power than you thought!  Your income, the lower interest rates and our local lower home prices make it easier for you to afford a home today than at any other time in the last 20 years.  This article explains the power of the higher income and lower interest rates.  In our Southwest Florida area, our prices are lower than most of the country and have declined over the last year so that adds even more power to you as the buyer.  Exert your power and call me so we can start looking for that new home!


Courtesy of Keeping Current Matters 2018

House-Buying Power at Near-Historic Levels | MyKCM

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).

House-Buying Power at Near-Historic Levels | MyKCM

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.”

Don’t wait for prices to reach their peak, buy your home now during the hot and humid summer and save $$$$$$$!

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