WASHINGTON—A new report indicates that home ownership is becoming more affordable for Americans, despite rising interest rates.
The Congressional Budget Office’s Budget and Economic Outlook report for 2016 to 2026 predicts that wage growth will outpace growth in home prices in 2016, reversing the trend from 2015.
In 2015, home prices grew an estimated 4.4%, while wage growth only hit 2.3%. In 2016, the CBO forecasts 3.3% growth in wages and 2.1% growth in home prices.
“Despite historically low interest rates, growth in home values has priced many would-be buyers out of the market,” said NAFCU Chief Economist and Director of Research Curt Long. “With household formation accelerating, we need to see some increased construction to alleviate the upward pressure on prices. Otherwise, home price appreciation may continue to outstrip wage growth, despite the CBO’s projections.”
The CBO estimates wages will grow at an annual rate of 3.3% between 2016 and 2017 and 3.6% from 2018 to 2020. Meanwhile, the CBO estimates house prices will grow at an annual rate of 2.4 percent between 2017 and 2020.