Consumer home-buying power showed both monthly and year-over-year decreases in October, according to the First American Real House Price Index (RHPI).
The RHPI found real house prices increased 0.9 percent between September and October and increased 8.6 percent year-over-year. Consumer house-buying power, how much one can buy based on changes in income and interest rates, decreased 0.8 percent between September and October and declined 2.8 percent year-over-year, the RHPI found.
“Over the past 12 months, affordability has declined as unadjusted house prices have increased faster than buying power and demand has continued to outpace supply” First American Chief Economist Mark Fleming said in a release. “Existing homeowners are increasingly prisoners in their own homes, as the fear of not being able to find something to buy prevents homeowners from putting their homes on the market, limiting the supply of existing homes for sale.
“At the same time, first-time homebuyers, enticed by low mortgage rates, continue to enter the market, adding demand. Homebuilders are also struggling to add more new-home inventory. Looking forward, the long and short (supply) of it is that the housing market in 2018 will be similar to the strong sellers’ market we experienced in 2017,” Fleming added.
According to the RHPI, real house prices in October were 38.2 percent below their housing boom peak in July 2006 and 16.9 percent below January 2000.
The states with the largest year-over-year increases in the RHPI were Delaware (+18.2 percent); Idaho (+14.9 percent); Nevada (+14.9 percent); New York (+13.6 percent); and Missouri (+13.5 percent). The states with the smallest year-over-year increases in the RHPI were Alabama (+1.2 percent); Arkansas (+3.2 percent); Maryland (+3.4 percent); Vermont (+3.5 percent); and Hawaii (+4.0 percent).
The metropolitan areas with the largest year-over-year increases in the RHPI were San Jose, Calif. (+18.7 percent); Las Vegas (+17.4 percent); Seattle (+15.8 percent); Charlotte, N.C. (+14.4 percent); and Nashville, (+14.4 percent). The metropolitan areas with the smallest year-over-year increases were Pittsburgh (+0.5 percent); Memphis (+6.3 percent), Virginia Beach (+6.8 percent); Portland (+6.9 percent); and Riverside, Calif. (+7.0 percent).
“According to Realtor.com, October marked the 38th consecutive month of year-over-year declines in inventory levels. The lack of supply is driving unadjusted house prices higher,” Fleming said.