First American’s proprietary Real House Price Index (RHPI) looks at September 2016 data and includes analysis from First American Chief Economist Mark Fleming that includes comments on last week’s conforming loan limit increase.

“The 2017 conforming loan-limit increase announced last week was prompted by the fact that house prices have surpassed the pre-decline level established in the third quarter of 2007, according to the FHFA index,” said Fleming. “Nominally, the price recovery is officially complete, but in real purchasing-power adjusted terms, houses prices are still far below the pre-decline peak. The underlying story is consumer house-buying power is better than it has been in a generation.”

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.

“Even with the recent uptick, mortgage rates remain at historically low levels. The low rates, combined with recent meaningful income gains, fueled an increase in consumer house-buying power, keeping affordability at a quarter-century best.”

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 is updated monthly with new data. Look for the next edition of the RHPI the week of December 26, 2016.