In August, U.S. homes were at their most affordable level since data became available in 1969, according to a new index launched by Beacon Economics, a Los Angeles-based macroeconomic forecaster.
The August estimate showed that the cost of home ownership, including mortgage interest plus principal payments after a 20% down payment, fell to 16.9% from 17.1% in July. Overall, the Beacon Economics home affordability index has remained below 20% for the past 21 months.
“Home affordability has reached an historic high,” said Beacon Economics Founding Principal Christopher Thornberg in a statement. “Nationwide, prices are down approximately 25% from their peak, and mortgage financing rates are at all-time lows.”
Thornberg’s assessment was bullish for the economy. The high level of affordability is likely to drive demand and reduce the stock of excess inventory, ultimately resulting in the need for new housing, a rise in prices, and a pickup in new construction, according to Thornberg.