First American

Supply Squeeze Tightens Grip on Affordability in July

First American’s proprietary Real House Price Index (RHPI) looks at July 2017 data and includes analysis from First American Chief Economist Mark Fleming on the supply constraints impacting the housing market.


“Rising rates and rapid price appreciation driven by the lack of supply caused affordability to decline in July. Based on our RHPI, affordability has declined by more than 10 percent over the last year. But, the loss in affordability is only significant to potential first-time buyers,” said Mark Fleming, chief economist at First American. “Existing homeowners with fixed-rate mortgages benefited from the rising prices with increased equity. You’re perspective on rising home prices and affordability largely depends on whether you are a homeowner or not.”


For Mark’s full analysis on affordability, the top five states and markets with the greatest increases and decreases in real house prices, and more, please visit the Real House Price Index.

“Existing homeowners' refusal to list their homes for sale over concerns about finding a home to buy is a critical driver of supply constraint.”

The RHPI offers an alternative view of the change over time of house prices at the national, state and metropolitan area level. The traditional perspective on house prices is fixated on the actual prices and the changes in those prices, which overlooks what really matters to potential buyers - their purchasing power, or how much they can afford to buy. The RHPI adjusts prices for purchasing power by considering how income levels and interest rates influence the amount one can borrow.


The RHPI is updated monthly with new data. Look for the next edition of the RHPI the week of October 23, 2017.

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