​Americans’ house-buying power down

[William Hull]

Houses are becoming harder to buy thanks to mortgage increases that occurred after the election. December statistics saw a decrease in house buying power, as reported by First American's Real House Price Index, this decrease has been occurring by about 2.1 percent per year but November to December saw a decrease of 5.1 percent. Mark Fleming, First American's chief economist relates that house prices and mortgage rates have soared while incomes have not, this has lead to a decrease in the ability of first time buyers to afford new homes. The decline occurring in December has not happened in over two and a half years. First American monitors several markets and has reported that the decline was widespread throughout almost all of them. The recent FMOC rate increases, and the fact that there is a lower inventory of houses available for sale has pushed nominal houses prices up, causing real purchasing power adjusted house prices to surge in December. Real house prices have increased about 8 percent since December of 2015, increasing by 6.2 percent month over month in This past December. When evaluating year over year unadjusted house prices, there has been a definite increase since the housing boom peak of 2017.

Key Takeaways:

• First American’s most recent Real House Price Index reveals that consumer house-buying power suffered a decrease in December, due in part to post-election mortgage rate increases.
• Mortgage rates and home prices are increasing at a faster rate than the rate of income growth, a dynamic which has led to an overall decrease in housing affordability.
• The decrease in affordability for first-time home buyers is a first within the last two and a half years, but housing affordability has not dropped below rates from 2009.

"The decrease in affordability seen in December was widespread, impacting all but one of the markets we track,” Fleming said. “Low inventory of homes for sale is creating increased competition in the market and pushing nominal prices higher. Add declining purchasing power because of the jump in mortgage rates, and affordability for first-time homebuyers declines.”"

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