Affordability Increases in August Due to a Dip in Rates, According to First American Real House Price Index

Despite August’s slight increase in affordability, supply constraints continue to drive unadjusted prices higher, producing year-over-year affordability declines in all of the markets tracked by First American, says Chief Economist Mark Fleming

October 30, 2017, Santa Ana, Calif.

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 August 2017 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.

August 2017 Real House Price Index

  • Real house prices decreased 0.4 percent between July and August.
  • Real house prices increased 9.6 percent year-over-year.
  • Consumer house-buying power, how much one can buy based on changes in income and interest rates, increased 0.8 percent between July and August, and fell 3.2 percent year-over-year.
  • Real house prices are 38.4 percent below their housing-boom peak in July 2006 and 17.2 percent below the level of prices in January 2000.
  • Unadjusted house prices increased by 6.1 percent in August on a year-over-year basis and are 4.2 percent above the housing boom peak in 2007.

Chief Economist Analysis: Respite in Affordability Likely to Fade

“A dip in mortgage rates in August offset rapid price appreciation driven by the lack of supply, as existing homeowners remain reluctant to sell for fear of not being able to find something to buy. However, based on our RHPI, over the past 12 months affordability has declined by more than 9 percent,” said Mark Fleming, chief economist at First American. “Though consumer house-buying power improved in August, affordability is likely to fade as mortgage rates are expected to rise in the months to come, but lower affordability is only significant to potential first-time buyers. Existing homeowners with fixed-rate mortgages benefited from the rising prices with increased equity. If you’re renting and thinking of buying, then now is the time.”

“As mortgage rates rise on the back of the last months’ FOMC decision to reduce its portfolio of bonds and supply remains constrained, affordability will continue to decline for those seeking to achieve the goal of homeownership. Yet, while affordability is lower than a year ago, it remains high by historic standards. Only three states and the District of Columbia are less affordable today than they were in January 2000,” said Fleming.      

Additional Quotes from Chief Economist Mark Fleming

  • “According to the National Association of Realtors, the number of existing homes listed for sale declined to a 4.2-month supply in September, which marked the 28th consecutive month of year-over-year declines in inventory levels. The lack of supply is driving unadjusted house prices higher.”  
  • “According to our latest Real Estate Sentiment Index (RESI), one critical reason for the supply constraint is that existing homeowners are unwilling to list their homes for sale for fear of not being able to find something to buy.”
  • “However, lower mortgage rates in August compared with July, combined with a modest 0.1 percent month-over-month increase in wages, helped offset rising nominal house prices, producing a slight 0.4 percent increase in affordability in August.”
  • “Last month, the Federal Open Market Committee (FOMC) announced that it will begin to reduce its large portfolio of bonds, which is likely to push mortgage rates higher in the coming months. This quantitative un-easing will further impact affordability.”

August 2017 Real House Price State Highlights

  • The five states with the greatest year-over-year increase in the RHPI are: Delaware (+16.2 percent), Nevada (+15.1 percent), Alaska (+14.1 percent), Massachusetts (+13.8 percent), and Washington (+13.7 percent).
  • The five states with the smallest year-over-year increase in the RHPI are: Alabama (+2.8 percent), North Dakota (+3.8 percent), Hawaii (+4.2 percent), New Jersey (+4.2 percent), and Washington D.C. (+4.6 percent).   

    August 2017 Real House Price Local Market Highlights

  • Among the Core Based Statistical Areas (CBSAs) tracked by First American, the five markets with the greatest year-over-year increase in the RHPI are: Las Vegas (+18.0 percent), Seattle (+17.6 percent), Nashville, Tenn. (+17.6 percent), San Jose, Calif. (+17.5 percent), and Charlotte, N.C. (+16.8 percent).
  • Among the CBSAs tracked by First American, the five markets with the smallest year-over-year increase in the RHPI are: St. Louis (+0.3 percent), Pittsburgh (+2.2 percent), Virginia Beach, Va. (+6.7 percent), Memphis, Tenn. (+7.5 percent), and Baltimore (+8.1 percent).

    Next Release

    The next release of the First American Real House Price Index will be the week of November 27, 2017 for September 2017 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. © 2017 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; and banking, trust and investment advisory services. With total revenue of $5.6 billion in 2016, the company offers its products and services directly and through its agents throughout the United States and abroad. In 2016 and again in 2017, First American was named to the Fortune 100 Best Companies to Work For® list. More information about the company can be found at