Real house prices increased 1.2 percent between October 2019 and November 2019, according to First American Financial Corp.’s latest Real House Price Index (RHPI).
However, real house prices declined 8.1 percent between November 2018 and November 2019. Meanwhile, consumer house-buying power increased 0.2 percent between October 2019 and November 2019, and increased 17.9 percent year-over-year, according to the RHPI.
“Once again, homebuyers benefitted from a year-over-year affordability boost as two of the three key drivers of the Real House Price Index, household income and mortgage rates, swung in favor of increased affordability in November,” First American Chief Economist Mark Fleming said in a release.
“Compared with November 2018, the 30-year, fixed-rate mortgage fell by 1.2 percentage points and household income increased 2.6 percent. Both trends, rising household income and declining mortgage rates, boost consumer house-buying power,” Fleming said. “However, increased house-buying power also drives demand, and rising demand in a supply constrained market results in faster nominal house price appreciation.”
The RHPI found that median household income has increased 2.6 percent since November 2018 and 58.1 percent since January 2000. Additionally, real house prices are 16.7 percent less expensive than in January 2000.
First American said affordability increased the most in San Jose, Calif.; Baltimore; Riverside, Calif.; San Francisco; and Denver.
“Declining mortgage rates increase affordability equally in each market, as mortgage rates are generally the same across the country,” Fleming said. “However, household income growth and nominal house prices vary by market, so the affordability dynamic varies as well.
“In November, San Jose had the greatest year-over-year increase in affordability, mostly due to slower nominal house price appreciation compared with the other markets,” he added. “Baltimore had slightly higher nominal house price appreciation compared with Riverside, 5.2 percent and 5.8 percent respectively, but outpaced Riverside when it came to house-buying power, growing by 22 percent versus Riverside’s 21 percent.
“Finally, the intricate dance between house-buying power and nominal house price appreciation becomes clear when comparing the cities taking the final top spots: San Francisco and Denver,” Fleming said. “The improvement in affordability in San Francisco was slightly greater than Denver due to slower nominal house price appreciation (3 percent versus Denver’s 4.2 percent), even though house-buying power in Denver outpaced San Francisco by 0.6 percentage points.”
The five states with the greatest year-over-year decrease in the RHPI were New Mexico (-12.9 percent); California (-12.2 percent); Utah (-11.9 percent); Nebraska (-11.5 percent); and Mississippi (-11.4 percent).