Inventory
info icon
Single family homes on the market. Updated weekly.Powered by Altos Research
735,718-296
30-yr Fixed Rate30-yr Fixed
info icon
30-Yr. Fixed Conforming. Updated hourly during market hours.
6.94%0.02
Mortgage

First American: Home prices point to trouble ahead

Data reveals Americans need income growth

Home prices have climbed 15.3% year over year, signaling affordability concerns lie ahead, according to First American’s Real House Price Index.

Notably, the average household income has increased 2.9% since September 2017 and 53% since January 2000.

First American Chief Economist Mark Fleming said the importance of household income growth’s ability to mitigate the loss of affordability from a rising mortgage rate is clear.

“Without stronger household income growth, rising mortgage rates will continue to impede consumer house-buying power, reducing affordability,” Fleming said.

According to First American’s data, from August 2018 to September 2018 real house prices rose 2%. However, consumer buying power fell 0.9% between this time period, and declined 6.7% year over year.

When consumer house-buying power is a factored in, home prices are actually 37% below their 2006 peak and 11% below prices in January 2000.

“The jump in mortgage rates reduced house-buying power by $36,000 since September 2017,” Fleming continued. “Over the same period, household income growth increased consumer house-buying power by $10,000.”

“The net effect? Overall consumer house-buying power fell by $26,000 in September compared with a year ago,” Fleming said. “At the moment, rising mortgage rates are winning the buying power tug-of-war with rising household incomes – the pace of household income growth is not sufficient to fully offset the change in mortgage rates.”

In September, the five markets with the highest year-over-year growth in the RHPI were Cleveland (28.2%), Las Vegas (26.6%), Cincinnati (23.8%), Atlanta (23.4%) and Orlando (22.6%).

“At first glance, these markets don’t seem to have much in common. Upon closer inspection, however, all five markets had household income growth below the national average of 2.9%,” Fleming said. “Orlando uniquely experienced a decline in household income of 0.4% compared with a year ago.”

Fleming said as the age-old adage goes, housing is all about location, location, location. Affordability is no different.

Most Popular Articles

Latest Articles

Lower mortgage rates attracting more homebuyers 

An often misguided premise I see on social media is that lower mortgage rates are doing nothing for housing demand. That’s ok — very few people are looking at the data without an agenda. However, the point of this tracker is to show you evidence that lower rates have already changed housing data. So, let’s […]

3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please