Home Prices Continued to Climb in September, Raising Affordability Concerns

0

U.S. home prices increased 0.4% in September compared with August and were up 3.5% compared with September 2018, according to CoreLogic’s home price index report.

Every state posted an annual increase.

Currently, CoreLogic forecasts that home prices will increase by 0.3% from September to October and 5.6% during the 12 months ended September 2020.

September’s low mortgage rates helped to push home prices upward.

“Mortgage rates were a full percentage point lower this September compared to a year ago, boosting affordability for first-time buyers and supporting a rise in homeownership,” says Frank Nothaft, chief economist at CoreLogic, in a statement. “In addition to lower interest rates, personal income grew faster than home prices during the past year. This provided an additional lift for first-time buyer affordability and helped to boost the homeownership rate to the highest level in more than five years.”

The downside of rising home prices, of course, is the impact on affordability.

Research recently commissioned by CoreLogic shows that millennials are not particularly confident with their personal finances – nor the U.S. economy – compared to older generations. Still, one in five millennials perceive buying a home as affordable, which is more optimistic compared to their older counterparts, according to the research, which was conducted in the second quarter.

About 42% of older millennials (age 30 to 38) said they spent more on their home purchase than expected, with new home buyers in this demographic spending an average of $383,000 on a home. This may be a factor that has caused initial down payments to be sourced from savings. 

In fact, the average home buyer in this cohort put a 16% down payment on their home, with nearly half of those funds coming from a 401(k) or retirement account, CoreLogic says.

“As a group, more millennials are entering the home-buying market and they report spending more money than they anticipated,” says Frank Martell, president and CEO of CoreLogic. “This may impact their future financial planning. Millennials age 30 to 38 put down less than 20 percent for a down payment over the past three years and used funds from their retirement accounts to cover an average of seven percent of that down payment.”

Last week, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index for August was released, showing that home prices increased 0.3% compared with July and were up 3.2% compared with August 2018.

Leave a Comment<br><font style='font-size:16px;color:#777;'>Your email address will not be published. Required fields are marked * </font>

avatar
  Subscribe  
Notify of