Home prices may be high, but for those renting, now might be the perfect time to buy.
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According to CoreLogic, home prices rose 6.8% year-over-year in June. The financial and property data analytics firm expects that by June 2019, home prices will increase by another 5.1% nationwide.
While home prices are on the rise, according to an article written by Mark Fleming, chief economist at First American, home affordability for renters was the second highest on record in 2017.
Determining a renter’s house-buying power is based on the median renter’s income, the prevailing 30-year fixed mortgage rate, assumes a 5% down payment and using one-third of the renter’s pre-tax income on the mortgage. In 2017, the median renter household could afford to buy 64% of all the homes sold, the highest level of affordability since 2012 when renters could afford to by 68% of the homes sold.
Fleming also noted that over the last three years, renter housing buying power has increased fast enough to keep pace with home price appreciation, which means that over the period the share of homes that a renter can afford to buy has remained the same.
“Although mortgage rates are expected to rise, they are still low by historic standards, and real household incomes are the highest they have ever been,” Fleming noted. “Assuming this trend continues, our measure of affordability, which takes into account income, interest rates, and house prices, indicates that homeownership is still within reach for renters.”
This comes as the number of Americans renting has increased. Pew Research Center analysis of Census Bureau housing data found that in the period of 2006 to 2016, the number of renters increased from 31.2% to 36.6%.