In 2018 mortgage payments spiked to a seven-year high, but recent data from Corelogic forecasts that increase may be slowing its pace. This is good news for homebuyers who could see a break in gains and better affordability after the typical mortgage payment rose to triple that of prices last year. As a result, home sales dropped, exacerbating the impact of inflation and weakening average homebuyer power.
The recent CoreLogic Home Price Index Forecast (HPI) suggests a 4.4 percent annual gain in home prices by this November. However, the consensus rate forecast indicates a 4.8 percent rate on 30-year fixed rate mortgages this November, which would still be higher than the average rates seen last December (4.6 percent) and this January (4.5 percent). The U.S. median sale price in November 2018 was $220,083—a 4.8 percent increase year over year. The typical mortgage payment was up 17.9 percent.
The report stated that one way to measure the impact of inflation, mortgage rates, and home prices on affordability over time is to look at the “typical mortgage payment” or the mortgage-rate-adjusted monthly payment based on each month’s U.S. median home sale price. The typical mortgage payment is a good indicator of affordability because it shows the monthly amount that a borrower would have to qualify for to get a mortgage to purchase the median-priced U.S. home.
The HPI Forecast also suggests the median sale price will rise 2.2 percent in inflation-adjusted or “real” terms over the year ending November 2019. Based on that projection, the real typical monthly mortgage payment would rise from $934 in November 2018 to $943 by November 2019—a 0.9 percent year-over-year gain. In other words, the typical mortgage payment year-over-year increase in November 2019 would be 3.1 percent. CoreLogic expects homebuyers to gain purchasing power this year if the predictions for prices, rates, and income remain steady.
Read the full report here.