The Fundamental Underlying Issue in the Housing Market

First American’s proprietary Real House Price Index (RHPI) looks at June 2017 data and includes analysis from First American Chief Economist Mark Fleming on the prevailing issue facing today’s housing market.


“The underlying fundamental issue is an overwhelming lack of supply. With current homeowners facing a prisoner’s dilemma and unwilling to list their homes for sale, little relief is expected in the supply of existing homes. The supply of newly constructed homes is also sagging, adding to the supply challenges,” said Fleming. “Over the last eight years, housing demand has increased by 5.9 million, but the net new number of housing units has only increased by 3.5 million. This supply shortage will continue to put pressure on affordability and strain first-time home buyers entering the market.”

“The underlying fundamental issue is an overwhelming lack of supply. Existing homeowners face a prisoner’s dilemma and over the last eight years new construction has not kept pace with new demand.”

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 September 25, 2017.

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