First American

The Drag on Affordability Explained

First American’s proprietary Real House Price Index (RHPI) looks at October 2017 data and includes analysis from First American Chief Economist Mark Fleming on the market forces that are keeping a lid on affordability.


“Over the past 12 months, affordability has declined as unadjusted house prices have increased faster than buying power and demand has continued to outpace supply. Existing homeowners are increasingly prisoners in their own homes, as the fear of not being able to find something to buy prevents homeowners from putting their homes on the market, limiting the supply of existing homes for sale. At the same time, first-time homebuyers, enticed by low mortgage rates, continue to enter the market, adding demand,” said Mark Fleming, chief economist at First American. “Homebuilders are also struggling to add more new-home inventory. Looking forward, the long and short (supply) of it is that the housing market in 2018 will be similar to the strong sellers’ market we experienced in 2017.”

“The housing market in 2018 will be similar to the strong sellers’ market we experienced in 2017.” 

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.


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 January 29, 2018.

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