But with inventory still tight, don’t expect the change to last
Home affordability improved in September from August, but the boost for homebuyers is not likely to last, according to the Real House Price Index released by First American Financial.
The index revealed that real house prices fell 0.9% between August and September, but increased 8% on a year-over-year basis. House-buying power among consumers rose 1.3% month over month, but declined 2.1% compared to September 2016.
First American said that September’s real house prices are 38.9% below their July 2006 peak during the housing boom. Compared to January 2000 prices, current prices are 17.9% lower. Unadjusted house prices increased by 5.7% in September on a year-over-year basis.
First American Chief Economist Mark Fleming said the short-term boost for homebuyers is unlikely to last given increasing unadjusted prices due to supply constraints.
“Consumer house-buying power improved in September due to a combination of slightly lower rates and rising wages compared with August,” Fleming said. “However, over the past 12 months, affordability has declined by 8% as nominal prices have increased faster than buying power. Demand continues to outpace supply as existing homeowners remain reluctant to list their homes for sale for fear of not being able to find a home to buy, while home buyers, enticed by low mortgage rates, continue to enter the market.”
“Mortgage rates are expected to increase next year as the Federal Reserve slowly begins to unwind its portfolio of bonds,” he said. “Persistent supply constraints will also remain a challenge for those seeking to achieve homeownership. Nonetheless, while lower than a year ago, affordability remains high by historic standards. Only four states and the District of Columbia are less affordable today than they were in January 2000.”
Related stories:
Housing market underperforms potential as supply remains tight
Why aren’t homeowners selling?
The index revealed that real house prices fell 0.9% between August and September, but increased 8% on a year-over-year basis. House-buying power among consumers rose 1.3% month over month, but declined 2.1% compared to September 2016.
First American said that September’s real house prices are 38.9% below their July 2006 peak during the housing boom. Compared to January 2000 prices, current prices are 17.9% lower. Unadjusted house prices increased by 5.7% in September on a year-over-year basis.
First American Chief Economist Mark Fleming said the short-term boost for homebuyers is unlikely to last given increasing unadjusted prices due to supply constraints.
“Consumer house-buying power improved in September due to a combination of slightly lower rates and rising wages compared with August,” Fleming said. “However, over the past 12 months, affordability has declined by 8% as nominal prices have increased faster than buying power. Demand continues to outpace supply as existing homeowners remain reluctant to list their homes for sale for fear of not being able to find a home to buy, while home buyers, enticed by low mortgage rates, continue to enter the market.”
“Mortgage rates are expected to increase next year as the Federal Reserve slowly begins to unwind its portfolio of bonds,” he said. “Persistent supply constraints will also remain a challenge for those seeking to achieve homeownership. Nonetheless, while lower than a year ago, affordability remains high by historic standards. Only four states and the District of Columbia are less affordable today than they were in January 2000.”
Related stories:
Housing market underperforms potential as supply remains tight
Why aren’t homeowners selling?
