Housing Affordability Improves Slightly in January as Mortgage Rates Hold Steady, According to First American Real House Price Index
—While affordability is lower compared to a year ago, the level of affordability in most markets is still high by historical standards, which is why demand is expected to remain strong this spring, says Chief Economist
- Real house prices decreased 0.1 percent between
December 2016 andJanuary 2017 . - Real house prices increased by 8.2 percent year-over-year.
- Consumer house-buying power, how much one can buy based on changes in income and the interest rate, increased 0.6 percent between
December 2016 andJanuary 2017 , while falling 2.3 percent year-over-year. - Real house prices are 33.3 percent below their housing-boom peak in
July 2006 and 10.3 percent below the level of prices inJanuary 2000 . - Unadjusted house prices increased by 5.7 percent in January on a year-over-year basis and are 1.9 percent above the housing boom peak in 2007.
Chief Economist Analysis: Did Homes Become More Affordable for First-Time Home Buyers in January?
“Real purchasing-power adjusted house prices declined 0.1 percent in January, as mortgage rates did not meaningfully change and income growth continued. Despite the monthly increase in affordability and continued strong wage growth, homes are less affordable across the country compared to a year ago,” said
“Almost half of the markets we track saw double-digit affordability declines in January, compared with a year ago. The low inventory of homes for sale across much of the country is creating increased competition and setting the stage for a very robust sellers’ market this spring,” said Fleming. “While affordability is lower compared to a year ago, the level of affordability in most markets is still high by historical standards, which is why demand is expected to remain strong this spring.”
Additional Quotes from Chief Economist
- “The 30-year, fixed-rate mortgage decreased 5 basis points between December and January.”
- “Mortgage rates increased almost 75 basis points in November and December in response to the decision by the
Federal Open Market Committee (FOMC) in December to raise the Federal Funds Rate and expectations for policy changes favoring economic growth following the election.” - “Wage growth cooled slightly, growing at an annual rate of 2.5 percent, after posting the fastest growth rate since 2009 in December 2016.”
- “Homes, on a real purchasing-power adjusted basis, are 8.2 percent more expensive than they were a year ago.”
- “On a year-over-year basis, real house prices increased in all the metropolitan areas tracked by First American.”
- “Yet, the level of affordability remains high. Even as rates are increasing, there are many markets where a median income can purchase more than the median priced house.”
- “Housing affordability declined 19.3 percent in
Jacksonville, Fla. over the last 12 months, the largest decline in the nation in that time frame, asJacksonville , like many other markets, has experienced very low inventories of homes listed for sale.”
- The five states with the greatest year-over-year increase in the RHPI are:
New York (+13.4 percent),Colorado (+13.2 percent),Vermont (+12.7 percent),Illinois (+11.8 percent) andMaine (+11.6 percent). - The only two states with a year-over-year decrease in the RHPI are:
Mississippi (-4.8 percent) andConnecticut (-3.0 percent).
- 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:
Jacksonville, Fla. (+19.3 percent),Charlotte, N.C. (+14.0 percent),Milwaukee (+14.0 percent),Denver (+12.6 percent), andTampa, Fla. (+12.4 percent). - Among the CBSAs tracked by First American, the markets with the smallest year-over-year increase in the RHPI are:
Baltimore (+4.1 percent),Virginia Beach, Va. (+4.4 percent),San Francisco (+4.5 percent),San Jose, Calif. (+5.3 percent) andHartford, Conn. (+5.4 percent).
Next Release
The next release of the First American Real House Price Index will be the week of
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. © 2017 by First American. Information from this page may be used with proper attribution.
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