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How Interest Rates and Home-Buying Power Correlate

While rising interest rates decrease home-buying power, it's also important to note that rising incomes can offset that decrease, First American's Mark Fleming tells GlobeSt.com.

By Carrie Rossenfeld | Updated on February 12, 2018

Mark Fleming Fleming: “A growing economy and low, actually very low, unemployment should help to accelerate the growth of household income in the near future.”

SANTA ANA, CA—While rising interest rates decrease home-buying power, it’s also important to note that rising incomes can offset that decrease, First American Financial Corp.‘s chief economist Mark Fleming tells GlobeSt.com. In a recent report from the frim, Fleming said that unadjusted house prices increased by 6% in November 2017 on a year-over-year basis and are 6.3% above the housing boom peak in 2007, while over the same 12-month period, household incomes have increased by only 2.8%.

But Fleming also said in the report that the important thing to look at is buying power. “In fact, consumer house-buying power is 2.3 times higher than it was in 2000, almost two decades ago. It’s also only 2.9% below the peak in July 2016.”

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