https://www.google.com/analytics/web/#home/a69066132w111663562p116541675/

Price v Cost-Forget the Price of the Home, The Cost is What Matters!

Dated: 11/07/2019

Views: 4

 
Forget the Price of the Home. The Cost is What Matters. | MyKCM

Home buying activity (demand) is up, and the number of available listings (supply) is down. When demand outpaces supply, prices appreciate. That’s why firms are beginning to increase their projections for home price appreciation going forward. As an example, CoreLogic increased their 12-month projection for home values from 4.5% to 5.6% over the last few months.

The reacceleration of home values will cause some to again voice concerns about affordability. Just last week, however, First American came out with a data analysis that explains how price is not the only market factor that impacts affordability. They studied prices, mortgage rates, and wages from January through August of this year. Here are their findings:

Home Prices

“In January 2019, a family with the median household income in the U.S. could afford to buy a $373,900 house. By August, that home had appreciated to $395,000, an increase of $21,100.”

Mortgage Interest Rates

“The 0.85 percentage point drop in mortgage rates from January 2019 through August 2019 increased affordability by 9.7%. That translates to a $40,200 improvement in house-buying power in just eight months.”

Wage Growth

“As rates have fallen in 2019, the economy has continued to perform well also, resulting in a tight labor market and wage growth. Wage growth pushes household incomes upward, which were 1.5% higher in August compared with January. The growth in household income increased consumer house-buying power by 1.5%, pushing house-buying power up an additional $5,600.”

When all three market factors are combined, purchasing power increased by $24,500, thus making home buying more affordable, not less affordable. Here is a table that simply shows the data:Forget the Price of the Home. The Cost is What Matters. |  MyKCM

Bottom Line

In the article, Mark Fleming, Chief Economist at First American, explained it best:

“Focusing on nominal house price changes alone as an indication of changing affordability, or even the relationship between nominal house price growth and income growth, overlooks what matters more to potential buyers – surging house-buying power driven by the dynamic duo of mortgage rates and income growth. And, we all know from experience, you buy what you can afford to pay per month.”

 

 

Facebook Badge

About Me

My photo
Chris B. Johnson REALTOR® Specializes in Luxury Estates and Home Auctions. Your home is probably the biggest asset you own. This is why you should hire a professional to guide you through all your real estate transactions. My goal is to help 24 to 28 families each year either buy or sell a home. I am NOT interested in Selling 100 or 200 homes a year because I would not be able to give each family the time, attention and energy they deserve. I believe in Quality, NOT Quantity.
The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Keeping Current Matters, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.
Blog author image

Chris B Johnson

state_license/dre/bre_number: CalDRE 01501699 Chris B. Johnson REALTOR® Specializes in Luxury Estates and Home Auctions, Short Sale, Foreclosure and Probate Real Estate, Chris has been Certified as a....

Latest Blog Posts

La tasa de los propietarios de vivienda sigue en aumento

BY CHRIS B JOHNSON REALTOR®Real Estate Agent with Allison James Elite CA. BRE 01501699EMAIL  Share:November 12, 2019 09:59 AM https://activerain.com/droplet/5lmwLa tasa de

Read More

#FirstTimeHomeBuyers, Homeownership Rate Remains on the Rise

BY CHRIS B JOHNSON REALTOR®Real Estate Agent with Allison James Elite CA. BRE 01501699EMAIL   Share:November 12, 2019 09:41 AM My Los Angeles County Real Estate BLOG;

Read More

#VALoans - 75 Years of VA Home Loan Benefits

BY CHRIS B JOHNSON REALTOR®Real Estate Agent with Allison James Elite CA. BRE 01501699EMAIL  Share:November 11, 2019 11:35 AMMy Los Angeles County Real Estate BLOG   My

Read More

CALIFORNIA ECONOMIC FORECAST #TimeToSell by Mark Schniepp #ReBlog

BY CHRIS B JOHNSON REALTOR®Real Estate Agent with Allison James Elite CA. BRE 01501699EMAIL  Share:November 11, 2019 11:05 AM Happiness is High but for How Much Longer?

Read More