—Nationally, affordability improved on a year-over-year basis for
the first time since 2016, says Chief Economist Mark Fleming—
SANTA ANA, Calif.–(BUSINESS WIRE)–First
American Financial Corporation (NYSE: FAF), a leading
global provider of title insurance, settlement services and risk
solutions for real estate transactions, today released the March 2019 First
American Real House Price Index (RHPI). The RHPI measures the price
changes of single-family properties throughout the U.S. adjusted for the
impact of income and interest rate changes on consumer house-buying
power over time at national, state and metropolitan area levels. Because
the RHPI adjusts for house-buying power, it also serves as a measure of
housing affordability.
March 2019 Real House Price Index
-
Real house prices decreased 0.9 percent between February 2019 and
March 2019. -
Real house prices declined 0.04 percent between March 2018 and March
2019. -
Consumer house-buying power, how much one can buy based on changes in
income and interest rates, increased 1.5 percent between February 2019
and March 2019, and increased 5.2 percent year over year. -
Average household income has increased 3.0 percent since March 2018
and 56.0 percent since January 2000. - Real house prices are 15.0 percent less expensive than in January 2000.
-
While unadjusted house prices are now 2.6 percent above the housing
boom peak in 2006, real, house-buying power-adjusted house prices
remain 40.0 percent below their 2006 housing boom peak.
Chief Economist Analysis: Market Forces Swing Toward Improving
Affordability
“What began as a modest shift
toward a buyers’ market in six cities last month has expanded into a
national shift in affordability,” said Mark Fleming, chief economist at
First American. “The shift is a departure from the long-term trend in
the Real
House Price Index (RHPI), which had been steadily increasing
throughout the rising mortgage rate environment that began in 2017 and
continued until late 2018. Rising mortgage rates caused consumer
house-buying power to decline at the same time as tight supply pushed
house prices up rapidly.
“In March, two main components of the RHPI swung in favor of increased
affordability – continued strong household income growth and declining
mortgage rates,” said Fleming. “Nationally, affordability improved on a
year-over-year basis for the first time since 2016.”
House-Buying Power Soars to 2017 Levels
“In March, nominal house price appreciation increased to 5.2 percent
compared with March 2018, after an 11-month slowdown. Yet, despite
nominal house price acceleration, real house prices fell,” said Fleming.
“The reason? Declining mortgage rates and rising household income worked
together to boost consumer house-buying power sufficiently to overcome
the drag on affordability from rising nominal house prices.
“Consumer house-buying power climbed to $383,700 in March, 1.5 percent
higher than last month and 5.2 percent higher than one year ago,
reaching the highest level since December 2017,” said Fleming. “Mortgage
rates in March fell to 4.27 percent, or 0.17 percentage points lower
than one year ago. The decline in mortgage rates increased house-buying
power by $7,800 since March 2018. Over the same period, household income
grew by 3.0 percent, which boosted consumer house-buying power by nearly
$11,000. The net effect? Overall, consumer house-buying power increased
by nearly $19,000 in March compared with one year ago.”
Falling Real House Prices in More Markets
“Given the trend nationally, it’s no surprise that more markets
experienced falling real house prices,” said Fleming. “In last month’s
report, we identified the six cities that saw year-over-year declines in
the RHPI, but this month 15 of the 44 markets we track experienced a
year-over-year decline in the RHPI, and 43 out of 44 markets experienced
quarterly declines. The clear trend is affordability levels are
improving in more parts of the country.
“Surging consumer house-buying power is increasing demand, as can be
seen in the continued increase
in purchase applications. But, unless supply can keep pace with
demand, we should expect nominal house price appreciation to pick up,”
said Fleming. “The housing market, while different in many respects,
still reacts to tight supply and rising demand the old-fashioned way –
with faster price appreciation.”
March Real House Price State Highlights
-
The five states with the greatest
year-over-year increase in the RHPI are:
Wisconsin (+4.6 percent), New Hampshire (+3.9 percent), Ohio (+3.7
percent), Missouri (+3.0 percent), and Alaska (+3.0 percent). -
The five states with the greatest
year-over-year decrease in the RHPI are:
Wyoming (-6.9 percent), West Virginia (-4.1 percent), Louisiana (-4.1
percent), Alabama (-4.0 percent), and Oklahoma (-3.7 percent).
March 2019 Real House Price Local Market Highlights
-
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:
Columbus, Ohio (+5.9 percent), Providence, R.I. (+5.5 percent), Salt
Lake City (+5.1 percent), Atlanta (+3.7 percent), and Cincinnati (+3.6
percent). -
Among the Core Based Statistical Areas (CBSAs) tracked by First
American, the five markets with the greatest
year-over-year decrease in the RHPI are:
San Jose, Calif. (-7.6 percent), Seattle (-6.4 percent), San Francisco
(-4.4 percent), Portland, Ore. (-3.9 percent), and Los Angeles (-3.1
percent).
Next Release
The next release of the First American Real House Price Index will take
place the week of June 24, 2019 for April 2019 data.
Sources:
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. © 2019 by First
American. Information from this page may be used with proper attribution.
About First American
First American Financial Corporation (NYSE: FAF) is a leading
provider of title insurance, settlement services and risk solutions for
real estate transactions that traces its heritage back to 1889. First
American also provides title plant management services; title and other
real property records and images; valuation products and services; home
warranty products; property and casualty insurance; banking, trust and
wealth management services; and other related products and services.
With total revenue of $5.7 billion in 2018, the company offers its
products and services directly and through its agents throughout the
United States and abroad. In 2019, First American was named to the Fortune 100
Best Companies to Work For® list for the fourth consecutive
year. More information about the company can be found at www.firstam.com.
Contacts
Media Contact:
Marcus Ginnaty
Corporate Communications
First
American Financial Corporation
(714) 250-3298
Investor Contact:
Craig Barberio
Investor Relations
First
American Financial Corporation
(714) 250-5214
