Forget the Price of the Home. Cost is What Matters.
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 its 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 the 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:
“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.”
“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:
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 overlook 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.”
Considering Buying or Selling a Home?
If you are looking to buy or sell a home in Cape Coral, Fort Myers or Estero, I encourage you to work with a real estate professional or consultant who has the experience and knowledge to provide an accurate market comparison so you can set the Price Right. Contact us today to learn more about the current market and if selling how your home or condo stacks up against the competition and how we can position your property to sell quickly and for a fair price. Learn more about selling your home
If you’re looking for a focused and goal-oriented Realtor® in Southwest Florida who will help you achieve your Real Estate needs, please reach out to me directly. Additionally, if you are looking at buying or selling a home or condo, vacation home/condo, waterfront home/condo or to build your own dream home, call or text me at 239-770-6880 or email me at Jon@southwestfldreamhomes.com
About Jonathan Blaze, PA
The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Jonathan Blaze, MVP Realty or Southwest FL Dream Homes Team or Keeping Matters Current 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. Jonathan Blaze, MVP Realty or Southwest FL Dream Homes Team will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.