Now could be the best time to buy a home since early 2017 as mortgage rates combine have eased to help home affordability reach an 18-month high.
But while home prices have been accelerating at a lower pace for the past 15 months, that factor appears to be easing, with potentially higher price growth ahead.
So, we are potentially at something of a sweet spot with the average-priced home requiring 21.3% of the median household income, down from 23.3% in November 2018, when mortgage rates hit a 7-year high.
Black Knight’s Mortgage Monitor Report shows that the affordability landscape has changed significantly.
“Whereas nine states were less affordable than their long-term norms back in November – a key driver behind the subsequent deceleration in home prices – only California and Hawaii remained so as of July,2 explained Black Knight Data & Analytics President Ben Graboske. “And despite the average home price rising by more than $12K since November, today’s lower fixed interest rates have worked out to a $108 lower monthly payment when purchasing the average-priced home with 20% down.”
While California is one of only two states that remain less affordable than their long-term norms, affordability in the state has improved significantly in recent months. It now requires 34% of the median income to purchase the average home in California, down from 38% in November.
$45K more house for the same payment
Graboske added that the homebuying power of first-time buyers of an average-priced home has been boosted by around 15% due to the lower rates
“…meaning that they could effectively buy $45,000 ‘more house’ while still keeping their payments the same as they would have been last fall,” he said. “As affordability pressures have eased, it also appears to be putting the brakes on the home price deceleration we’ve been tracking since February 2018. After 15 consecutive monthly declines, the national home price growth rate for June stayed level from May at 3.78%.”