Wage Growth Contributes To Increased Affordability In Most Major Markets, 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 September 2016 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 and across the United States at national, state and metropolitan area levels. Because the RHPI adjusts for house-buying power, it also serves as a measure of housing affordability.

September 2016 Real House Price Index
  • Real house prices increased 1.0 percent between August 2016 and September 2016
  • Compared to September 2016, real house prices decreased by -2.0 percent.
  • Unadjusted house prices are expected to increase by 5.3 percent in September on a year-over-year basis.
  • Real house prices are 40.4 percent below their housing-boom peak in July 2006 and 19.9 percent below the level of prices in January 2000.
  • Unadjusted, the national price level is 0.9 percent away from the housing-boom peak in 2007.

Chief Economist Analysis: Wage Growth Offsets Impact of September Interest Rate Surge, Contributing to Increased Affordability in Most Major Markets

"While a small uptick in rates in September caused an increase in real house prices compared to August, it is important to remember that mortgage rates remain at historically low levels. The low rates, combined with recent meaningful income gains, fueled an increase in consumer house-buying power, meaning affordability is at a quarter-century best," said Mark Fleming, chief economist at First American. "Even as interest rates increase above 4 percent post-election, housing, on a purchasing-power adjusted basis, will continue to be more affordable than it was in the early 1990s.

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