Buyers' Purchasing Power in 2019

Rising mortgage rates are dominating housing industry news coverage, yet Meyers Research director of economic research Ali Wolf has some surprising analysis on shifting rates and buying power in 2019.

After reaching new highs in 2018, mortgage rates are currently 9 percent lower, sitting at 4.51 percent. According to Wolf, the drop by nearly 50 basis points translates to 5 percent greater buying power for consumers. The Meyers Research team looked at the median new home price for single-family detached products in select markets, and calculated what consumers* "got back" for the recent downtrend in mortgage rates. The markets include Denver with the greatest consumer "credit" of almost $30,000 due to the rate change, Seattle, Los Angeles, Charlotte, N.C., Phoenix, Riverside, Calif., Las Vegas, Orlando, and Dallas, with a more than $15,000 gain.

Mortgage rates and the yield on 10-year Treasury notes are highly correlated. The latter hit a 7-year high in November, the same week mortgage rates shot up to just under 5.00 percent (The high was 4.94 percent according to Freddie Mac’s weekly survey). Since then, both have retreated.

*Based on a prime buyer who earns 20 percent more than the median household income in the respective metro and can put a 20 percent down payment. The calculation excludes any HOAs, but includes PITI.

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