News | August 27, 2019

Affordability Improves Despite Rising House Prices, According To First American Real House Price Index


First American Financial Corporation (NYSE: FAF), a leading global provider of title insurance, settlement services and risk solutions for real estate transactions, today released the June 2019 First American Real House Price Index (RHPI). The RHPI measures the price changes of single-family properties throughout the U.S. adjusted for the impact of income and interest rate changes on consumer house-buying power over time at national, state and metropolitan area levels.Because the RHPI adjusts for house-buying power, it also serves as a measure of housing affordability.

June 2019 Real House Price Index

  • Real house prices decreased 2.2 percent between May 2019 and June 2019.
  • Real house prices declined 4.6 percent between June 2018 and June 2019.
  • Consumer house-buying power, how much one can buy based on changes in income and interest rates, increased 3.3 percent between May 2019 and June 2019, and increased 12.2 percent year over year.
  • Average household income has increased 2.4 percent since June 2018 and 56.4 percent since January 2000.
  • Real house prices are 18.0 percent less expensive than in January 2000.
  • While unadjusted house prices are now 6.3 percent above the housing boom peak in 2006, real, house-buying power-adjusted house prices remain 41.3 percent below their 2006 housing boom peak.

Chief Economist Analysis: Why Affordability is Increasing When House Price Appreciation is on the Rise

“Two of the three key drivers of the Real House Price Index (RHPI), household income and mortgage rates, swung in favor of increased affordability in June. The 30-year, fixed-rate mortgage fell by 0.8 percentage points and household income increased 2.4 percent compared with June 2018,” said Mark Fleming, chief economist at First American. “When household income rises, consumer house-buying power increases. Declining mortgage rates have a similar impact on affordability, so in June home buyers received a double shot of house-buying power to jolt affordability in their favor nationally.

“The third component of the RHPI, nominal house prices, experienced a year-over-year increase of 7.0 percent in June. Increases in nominal house prices make housing less affordable. Yet, the RHPI experienced a 4.6 percent decline compared with one year ago,” said Fleming. “The reason? The true cost of housing reflects a consumers’ purchasing power, which is a function of mortgage rates and incomes, and in June, those measures tipped the scale in favor of affordability.”

Breaking Down the Forces Shaping Affordability

“The continual “tug-of-war” between house-buying power and nominal house prices, ultimately determines the fate of real house prices,” said Fleming. “We’ve examined each of the driving forces shaping affordability today below.”

  • Household Income: “Currently, the unemployment rate in the U.S. is at a 50-year low, jobs are plentiful, and wages are rising. In June, average hourly earnings increased 3.3 percent compared with one year ago, which translates to a 2.4 percent increase in household income. Since June 2018, household income growth increased consumer house-buying power by $8,600,” said Fleming.
  • Mortgage rates: “The 30-year, fixed-rate mortgage began declining in December 2018, and has continued to fall since. Cheaper mortgages boost the housing market by improving affordability. Since June 2018, falling mortgages rates have increased consumer house-buying power by $35,000,” said Fleming.
  • Nominal House Prices: “Rising house-buying power due to lower mortgage rates and strong income growth boosts affordability and supports demand. However, when demand increases for a scarce good, such as housing, prices will rise faster. Indeed, as predicted, nominal house price appreciation began to accelerate in April 2019, and has continued since. Faster house price appreciation works to reduce affordability,” said Fleming.

Consumer House-Buying Power Outweighs Rising House Prices

“The net effect of these dynamics? Consumer house-buying increased by $44,000 (12.2 percent) in June compared with one year ago, more than enough to overcome the 7 percent increase of nominal house price appreciation,” said Fleming. In fact, house-buying power is the highest it’s been since we began tracking it in 1991.”

June Real House Price State Highlights

  • There were no states with a year-over-year increase in the RHPI.
  • The five states with the greatest year-over-year decrease in the RHPI are: Wyoming (-9.8 percent), North Dakota (-9.3 percent), California (-9.3 percent), West Virginia (-8.5 percent), and New Mexico (-8.3 percent).

June 2019 Real House Price Local Market Highlights

  • Among the Core Based Statistical Areas (CBSAs) tracked by First American, the only market with a year-over-year increase in the RHPI is: Providence, R.I. (+1.3 percent).
    Among the Core Based Statistical Areas (CBSAs) tracked by First American, the five markets with the greatest year-over-year decrease in the RHPI are: San Jose, Calif. (-15.9 percent), Seattle (-10.9 percent), Portland, Ore. (-10.4 percent), San Francisco (-10.4 percent), and Los Angeles (-8.7 percent).

Next Release

The next release of the First American Real House Price Index will take place the week of September 23, 2019 for July 2019 data.



The methodology statement for the First American Real House Price Index is available at


Opinions, estimates, forecasts and other views contained in this page are those of First American’s Chief Economist, do not necessarily represent the views of First American or its management, should not be construed as indicating First American’s business prospects or expected results, and are subject to change without notice. Although the First American Economics team attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. © 2019 by First American. Information from this page may be used with proper attribution.

About First American

First American Financial Corporation (NYSE: FAF) is a leading provider of title insurance, settlement services and risk solutions for real estate transactions that traces its heritage back to 1889. First American also provides title plant management services; title and other real property records and images; valuation products and services; home warranty products; property and casualty insurance; banking, trust and wealth management services; and other related products and services. With total revenue of $5.7 billion in 2018, the company offers its products and services directly and through its agents throughout the United States and abroad. In 2019, First American was named to the Fortune 100 Best Companies to Work For® list for the fourth consecutive year. More information about the company can be found at

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