In April 2019, home prices fell 0.9%, declining 0.72% year over year, according to First American’s Real House Price Index.
According to First American’s data, unadjusted house prices sit 2.8% above the housing boom peak. Additionally, consumer buying power rose 1.5% between March and April, rising 6.7% year over year.
When consumer house-buying power is factored in, home prices are actually 40.7% below their 2006 peak and 15% below prices from January 2000.
First American Chief Economist Mark Fleming said only nominal house price appreciation dampened April’s affordability.
“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,” Fleming said. “In April, the rate of year-over-year nominal house price appreciation increased to 5.9%, compared with 5.8% in March.”
Despite this increase, Fleming said April’s consumer house-buying power gains were strong enough to win the affordability tug-of-war.
“Indeed, the RHPI, which adjusts nominal house prices based on changes in income and interest rates, decreased 0.72% compared with one year ago,” Fleming said. “The last time real house prices declined was in October 2016.”
According to the RHPI, America’s West Coast homebuyers felt this largest growth in affordability.
“While affordability improved nationally, real estate is all about ‘location, location, location,” Fleming said. “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.
The five markets to experience the largest growth in annual affordability were San Jose, Seattle, Portland, San Francisco and Los Angeles, according to First American.
“San Jose saw the greatest increase in affordability as house-buying power jumped by 6.9% due to the decline in mortgage rates and a 2.9% increase in household income compared with a year ago,” Fleming said. “Nominal house prices in San Jose also declined by 2.3% year-over-year, which further contributed to the 8.6% decline in real house prices. In Seattle, house-buying power increased by 8.8% due to a 4.7% increase in household income, which was more than enough to counter the 2% increase in nominal house prices compared with a year ago.”
Published at Fri, 28 Jun 2019 20:53:00 +0000