Real house prices increased 2.9 percent between September 2018 and October 2018, according to the latest First American Real House Price Index (RHPI).
Year-over-year, real house prices increased 16.2 percent. As a result, consumer house-buying power decreased 1.9 percent between September 2018 and October 2018, and declined 7.7 percent year-over-year, First American said.
“For the second consecutive month, all three key drivers of the [RHPI] – household income, mortgage rates, and the unadjusted house price index – increased compared with a year ago,” First American Chief Economist Mark Fleming said in a release. “The 30-year, fixed-rate mortgage and the unadjusted house price index increased by 0.9 percentage points and 7.3 percent, respectively.
“Even though household income increased 3 percent since October 2017 and boosted consumer house-buying power, the Real House Price Index increased 16.2 percent compared with last October, the highest yearly growth rate since 2014,” Fleming added.
According to the RHPI, average household income has increased 3 percent since October 2017 and 53.7 percent since January 2000. Real house prices are 35.5 percent below their housing boom peak in August 2006 and 9 percent below the level of prices in January 2000, the index found.
“In 2018, the housing market has largely been a victim of the economy’s success. The Federal Reserve is trying to keep inflation in check by increasing short-term interest rates and reducing their holdings of Treasury bonds and mortgage-backed securities,” Fleming said. “The Fed’s moves have pressured mortgage rates higher and made buying a home more expensive. Meanwhile, the healthy economy and robust labor market in 2018 has supported home buyer demand.
“Rising mortgage rates impact both housing supply and demand, limiting supply by reducing the propensity of sellers to sell and flattening demand by reducing consumer house-buying power,” Fleming said. “For homebuyers, the only way to mitigate the loss of affordability caused by a higher mortgage rate is with an equivalent, if not greater, increase in household income.”
First American said the five states with the greatest year-over-year increase in the RHPI were Ohio (+22.6 percent); Nevada (+22.2 percent); Georgia (+21 percent); New Hampshire (+20.7 percent); and New Jersey (+20.6 percent).
The five markets with the greatest year-over-year increase in the RHPI were Cleveland (+30.6 percent); Cincinnati (+24.8 percent); Las Vegas (+24.6 percent); San Antonio (+24.4 percent); and Atlanta (+22.7 percent).