Despite a relatively low rate of growth in home prices, the average mortgage payment has grown rapidly, according to a recent report from CoreLogic. According to the report, the U.S. median sale price has risen by just under 6 percent over the past year, while the principal-and-interest mortgage payment on the median-priced home has increased by around 15 percent.
CoreLogic predicts this trend to continue, as the CoreLogic Home Price Index Forecast predicts mortgage payments to rise by over 11 percent, while home prices are predicted to rise by just 4.7 percent year over year.
According to the report, inflation, the effect of mortgage rates, and home prices on affordability over time is measured by the “typical mortgage payment,” a mortgage-rate-adjusted monthly payment based on each month’s U.S. median home sale price. The “typical mortgage payment” is calculated using Freddie Mac’s average rate on a 30-year fixed-rate mortgage with a 20 percent down payment, not including taxes or insurance.
The U.S. median sale price in August 2018 was up 5.7 year over year, to $226,155, while the typical mortgage payment was up 14.5 percent due to a nearly 0.7-percentage-point rise in mortgage rates over that one-year period. CoreLogic predicts mortgage rates will rise by around 0.5 percentage points between August 2018 and August 2019, and the real typical monthly mortgage payment is expected to rise from $922 to $1000 within that same time frame.
While the inflation-adjusted typical mortgage payment has trended higher in recent years, in August 2018 it remained 28.1 percent below the all-time peak of $1,283 in July 2006. The report notes that the average mortgage rate in June 2006 was about 6.7 percent, compared with an average rate of about 4.6 percent in August 2018, and the inflation-adjusted U.S. median sale price in June 2006 was $248,980 (or $199,500 in 2006 dollars), compared with an August 2018 median of $226,155.
Find more information from CoreLogic here.