Because the RHPI adjusts for house-buying power, it also serves as a measure of housing affordability.
September 2019 Real House Price Index
Real house prices increased 0.9% between August 2019 and September 2019. Real house prices declined 7.6% between September 2018 and September 2019.
Consumer house-buying power, how much one can buy based on changes in income and interest rates, increased 0.2% between August 2019 and September 2019, and increased 15.8% year over year. Median household income has increased 2.5% since September 2018 and 57.7% since January 2000.
Real house prices are 18.8% less expensive than in January 2000. While unadjusted house prices are now 8.1% above the housing boom peak in 2006, real, house-buying power-adjusted house prices remain 42.2% below their 2006 housing boom peak.
Chief Economist Analysis: Affordability Declined in September Month Over Month
“Two of the three key drivers of the Real House Price Index (RHPI), household income and mortgage rates, modestly swung in favor of increased affordability in September, yet affordability declined month over month,” said Mark Fleming, chief economist at First American. “The 30-year, fixed-rate mortgage fell by 0.01 percentage points and household income increased 0.03 percent compared with August 2019. When household income rises, consumer house-buying power increases. Declining mortgage rates have a similar impact on consumer house-buying power.
“However, nominal house price appreciation jumped 1.1% in September, outpacing the benefits of rising house-buying power on affordability. Accordingly, the RHPI increased 0.9% month over month. Increases in the RHPI indicate a decline in affordability, and September’s decline in affordability was the largest month-over-month affordability decline since November 2018,” said Fleming. “In 2019, declining mortgage rates have increased house-buying power, fueling greater demand. However, when demand increases for a scarce (limited or low supply) good, prices will rise faster. While year-over-year, the RHPI shows an improvement in affordability, the increase in house-buying power in September was not enough to offset nominal house price gains compared with August.”
The Five Cities Where Affordability Decreased the Most
“Of the 44 markets we track, the RHPI increased in 41 of them month over month, meaning affordability declined in each," said Fleming. "The rise in the RHPI is a break from the long-term trend in 2019, as all of these markets are significantly more affordable than they were one year ago."
The five markets with the greatest month-over-month increases in the RHPI and thus the greatest declines in affordability were:
- New York, NY (1.61%)
- Jacksonville, FL (1.59%)
- Providence, RI (1.39%)
- Atlanta, GA (1.34%)
- Philadelphia, PA (1.28%)
