What kind of Macro Economic Events have Lowered buyer Purchasing Power in the Past?

The health of the real estate market depends on buyers being able to buy. Buyer purchasing power is key. Why are we doing so well at the moment? Sometimes, conditions conspire to derail buyer purchasing power. What sort of macro-economic events will cause that, and how close might we be to such an event?

About theBPPI

TheBuyer Purchasing Power Index(BPPI)is calculated using the average30-year fixed rate mortgage (FRM) ratefrom Freddie Mac (Western region) and the medianincomein California.

Apositive index numbermeans buyers can borrow more money this year than one year earlier.

Anegative index figuretranslates to a reduced amount of mortgage funds available.

Anindex of zeromeans there was no year-over-year change in the amount a buyer can borrow with the same income. At a BPPI of zero, homebuyers cannot purchase at higher prices than one year before unless they resort toadjustable rate mortgages (ARMs)to extend their borrowing reach or greater down payment amounts.

As long-term BPPI trend declines, the capacity of buyers to borrow purchase-assist funds is reduced. In turn, buyers needing purchase-