Five Cities Where Affordability Increased the Most, According to First American Real House Price Index
June 24 2019 - 8:00AM
Business Wire
—The intricate dance between house-buying
power and nominal house price appreciation determines the direction
and pace of affordability trends, says Chief Economist Mark
Fleming—
First American Financial Corporation (NYSE: FAF), a
leading global provider of title insurance, settlement services and
risk solutions for real estate transactions, today released the
April 2019 First American Real House Price Index (RHPI). The RHPI
measures the price changes of single-family properties throughout
the U.S. adjusted for the impact of income and interest rate
changes on consumer house-buying power over time at national, state
and metropolitan area levels. Because the RHPI adjusts for
house-buying power, it also serves as a measure of housing
affordability.
April 2019 Real House Price Index
- Real house prices decreased 0.9 percent between March 2019 and
April 2019.
- Real house prices declined 0.72 percent between April 2018 and
April 2019.
- Consumer house-buying power, how much one can buy based on
changes in income and interest rates, increased 1.5 percent between
March 2019 and April 2019, and increased 6.7 percent year over
year.
- Average household income has increased 2.7 percent since April
2018 and 56.2 percent since January 2000.
- Real house prices are 15.0 percent less expensive than in
January 2000.
- While unadjusted house prices are now 2.8 percent above the
housing boom peak in 2006, real, house-buying power-adjusted house
prices remain 40.7 percent below their 2006 housing boom peak.
Chief Economist Analysis: Lower Rates and Rising Wages Propel
Affordability Gains
“Two of the three key drivers of the Real House Price Index
(RHPI), household income and mortgage rates, swung in favor of
increased affordability in April. The 30-year, fixed-rate mortgage
fell by 0.33 percentage points and household income increased 2.7
percent compared to April 2018,” said Mark Fleming, chief economist
at First American. “When household income rises, consumer
house-buying power increases. Declining mortgage rates have a
similar impact on affordability, so in April home buyers received a
double shot of house-buying power to jolt affordability in their
favor nationally.
“Only nominal house price appreciation, which began to pick up
the pace in April, dampened affordability,” said Fleming.
“Declining mortgage rates have encouraged demand by increasing
house-buying power, however, when demand increases for a scarce
(limited or low supply) good, prices will rise faster. In April,
the rate of year-over-year nominal house price appreciation
increased to 5.9 percent, compared with 5.8 percent in March.
“Despite the increasing rate of nominal house price
appreciation, which makes homes less affordable, the consumer
house-buying power gains were strong enough to win the
affordability tug-of-war,” said Fleming. “Indeed, the RHPI, which
adjusts nominal house prices based on changes in income and
interest rates, decreased 0.72 percent compared with one year ago.
The last time real house prices declined was in October 2016.”
The Five Cities Where Affordability Increased the
Most
“While affordability improved nationally, real estate is all
about ‘location, location, location.’ Of the 44 markets we track,
affordability improved in 43 of them month-over-month, and
affordability improved in 18 markets on a year-over-year basis,”
said Fleming.
The five markets with the highest year-over-year growth in
affordability are:
- San Jose, Calif.
- Seattle
- Portland, Ore.
- San Francisco
- Los Angeles
“Declining mortgage rates increase affordability equally in each
market as mortgage rates are generally the same across the country.
However, household income growth and nominal house prices vary by
market, so the affordability dynamic varies as well,” said Fleming.
“In fact, one reason why these markets have seen such strong gains
in affordability is because household income growth was so strong.
In the top four markets, household income growth exceeded house
price growth. That’s an affordability boost even without the help
of falling rates.
“San Jose saw the greatest increase in affordability as
house-buying power jumped by 6.9 percent due to the decline in
mortgage rates and a 2.9 percent increase in household income
compared with a year ago,” said Fleming. “Nominal house prices in
San Jose also declined by 2.3 percent year-over-year, which further
contributed to the 8.6 percent decline in real house prices. In
Seattle, house-buying power increased by 8.8 percent due to a 4.7
percent increase in household income, which was more than enough to
counter the 2 percent increase in nominal house prices compared
with a year ago.
“The intricate dance between house-buying power and nominal
house price appreciation determines the direction and pace of
affordability trends. Faster nominal house price appreciation could
erode or even eliminate the affordability boosting benefits of
lower mortgage rates and rising income,” said Fleming. “In April,
home buyers were grateful that faster nominal house price
appreciation was not enough to overpower the increase in
house-buying power. Yet, more house-buying power brings more demand
and possibly even faster house price appreciation. The dance
continues.”
April Real House Price State Highlights
- The five states with the greatest
year-over-year increase in the RHPI
are: Wisconsin (+4.7 percent), Rhode Island (+4.3 percent), New
Hampshire (+3.5 percent), Georgia (+2.8 percent), and Ohio (+2.4
percent).
- The five states with the greatest
year-over-year decrease in the RHPI
are: North Dakota (-7.4 percent), Wyoming (-6.6 percent), Louisiana
(-4.3 percent), Vermont (-3.9 percent), and Oklahoma (-3.6
percent).
April 2019 Real House Price Local Market Highlights
- Among the Core Based Statistical Areas (CBSAs) tracked by First
American, the five markets with the greatest year-over-year increase in the RHPI are: Providence, R.I. (+5.9
percent), Las Vegas (+5.2 percent), Salt Lake City (+4.4 percent),
Orlando, Fla. (+3.9 percent), and Atlanta (+3.7 percent).
- Among the Core Based Statistical Areas (CBSAs) tracked by First
American, the five markets with the greatest year-over-year decrease in the RHPI are: San Jose, Calif. (-8.6
percent), Seattle (-6.3 percent), Portland, Ore. (-4.5 percent),
San Francisco (-4.3 percent), and Los Angeles (-3.1 percent).
Next Release
The next release of the First American Real House Price Index
will take place the week of July 29, 2019 for May 2019 data.
Sources:
- DataTree by First American
- Freddie Mac
- Census Bureau
Methodology
The methodology statement for the First American Real House
Price Index is available at
http://www.firstam.com/economics/real-house-price-index.
Disclaimer
Opinions, estimates, forecasts and other views contained in this
page are those of First American’s Chief Economist, do not
necessarily represent the views of First American or its
management, should not be construed as indicating First American’s
business prospects or expected results, and are subject to change
without notice. Although the First American Economics team attempts
to provide reliable, useful information, it does not guarantee that
the information is accurate, current or suitable for any particular
purpose. © 2019 by First American. Information from this page may
be used with proper attribution.
About First American
First American Financial Corporation (NYSE: FAF) is a
leading provider of title insurance, settlement services and risk
solutions for real estate transactions that traces its heritage
back to 1889. First American also provides title plant management
services; title and other real property records and images;
valuation products and services; home warranty products; property
and casualty insurance; banking, trust and wealth management
services; and other related products and services. With total
revenue of $5.7 billion in 2018, the company offers its products
and services directly and through its agents throughout the United
States and abroad. In 2019, First American was named to the Fortune
100 Best Companies to Work For® list for the fourth consecutive
year. More information about the company can be found at
www.firstam.com.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190624005358/en/
Media Contact: Marcus Ginnaty Corporate Communications
First American Financial Corporation (714) 250-3298
Investor Contact: Craig Barberio Investor Relations First
American Financial Corporation (714) 250-5214
First American (NYSE:FAF)
Historical Stock Chart
From Aug 2024 to Sep 2024
First American (NYSE:FAF)
Historical Stock Chart
From Sep 2023 to Sep 2024