|We keep hearing that home affordability is approaching crisis levels. While this may be true in a few metros across the country, housing affordability is not a challenge in the clear majority of the country. In their most recentReal House Price Index, First American reported that consumer “house-buying power” is at “near-historic levels.”
Their index is based on three components:
The report explains:
Combining these three crucial pieces of the home purchasing process, First American created an index delineating the actual home-buying power that consumers have had dating back to 1991.
Here is a graph comparing First American’s consumer house-buying power (blue area) to the actual median home price that year from the National Association of Realtors (yellow line).
Consumer house-buyer power has been greater than the actual price of a home since 1991. And, the spread is larger over the last decade.
Even though home prices are increasing rapidly and are now close to the values last seen a decade ago, the actual affordability of a home is much better now. As Chief Economist Mark Fleming explains in the report: