What Caused Real House Price Growth to Cool in May?

Written by: FirstAm Editor on Jul 24, 2017 8:00:00 AM

First American’s proprietary Real House Price Index (RHPI) looks at May 2017 data and includes analysis from First American Chief Economist Mark Fleming on the impact of wages and lower interest rates on consumer house-buying power – a brief reprieve from rising real house prices.


“The improvement in buying power offset the gains in unadjusted house prices, so affordability improved, albeit just barely.”


“Consumer house-buying power improved this month because of the small decline in the 30-year, fixed-rate mortgage and modest wage gains. The improvement in buying power offset the gains in unadjusted house prices, so affordability improved, albeit just barely,” said Mark Fleming, chief economist at First American. “Contrary to popular opinion, when considering real, consumer buying-power adjusted prices, prospective homebuyers benefited in May as homes became more affordable. Despite the tight supply and strong demand, real home prices remain well below housing boom peak levels.”

 

For Mark’s full analysis on affordability, the top five states and markets with the greatest and smallest increases 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 August 21, 2017.

072417 rhpi.jpg

Tags: Real House Price Index, Interest Rates, Income

Get the latest news

{{ module.title }}