Home Buyers’ Power on the Rise This Spring, According to First American Real House Price Index

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 January 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.

January 2019 Real House Price Index

• Real house prices decreased 1.9 percent between December 2018 and January 2019.
• Real house prices increased 7.0 percent year over year.
• Consumer house-buying power, how much one can buy based on changes in income and interest rates, increased 2.3 percent between December 2018 and January 2019, and declined 1.6 percent year over year.
• Average household income has increased 3.6 percent since January 2018 and 55.0 percent since January 2000.
• Real house prices are 14.0 percent less expensive than in January 2000.
• While unadjusted house prices are now 1.6 percent above the housing boom peak in 2006, real, house-buying power-adjusted house prices remain 38.8 percent below their 2006 housing boom peak.

Chief Economist Analysis: Market Trends Shift Toward Home Buyers in Early 2019

“While 2018 was largely characterized by declining affordability, ending the year with a five percent yearly decline in house-buying power, this trend reversed sharply in early 2019,” said Fleming. “Moderating home prices, in conjunction with gains in household income and declining mortgage rates, boosted affordability for potential home buyers.”

“Mortgage rates in January fell 0.18 percentage points compared with the previous month and household income increased 0.3 percent. The result? House-buying power increased 2.3 percent in January,” said Fleming. “Additionally, nominal house price appreciation in January sank to the slowest pace of growth since February 2015, according to the DataTree by First American’s House Price Index. As a result, real house prices fell 1.9 percent, the second largest monthly decline since April 2017.”