Affordability Surprises in September as Rates Dip and Wages Rise, According to First American Real House Price Index

Short-term boost for home buyers not expected to last, as supply constraints continue to drive unadjusted prices higher, says Chief Economist Mark Fleming

November 27, 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 September 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 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 2017 Real House Price Index

  • Real house prices decreased 0.9 percent between August and September.
  • Real house prices increased 8.0 percent year over year.
  • Consumer house-buying power, how much one can buy based on changes in income and interest rates, increased 1.3 percent between August and September and fell 2.1 percent year over year.
  • Real house prices are 38.9 percent below their housing boom peak in July 2006 and 17.9 percent below the level of prices in January 2000.
  • Unadjusted house prices increased by 5.7 percent in September on a year-over-year basis and are 4.7 percent above the housing boom peak in 2007.

Chief Economist Analysis: Limited Inventory and Rising Rates Likely to Impact Affordability

“Consumer house-buying power improved in September due to a combination of slightly lower rates and rising wages compared with August. However, over the past 12 months, affordability has declined by 8 percent 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,” said Mark Fleming, chief economist at First American.  

“Mortgage rates are expected to increase next year as the Federal Reserve slowly begins to unwind its portfolio of bonds. 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,” said Fleming.

Additional Quotes from Chief Economist Mark Fleming

  • “According to, September marked the 37th 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.”
  • “The market’s potential continues to increase. According to our latest Potential Home Sales model, potential existing-home sales increased in October to a 5.89 million seasonally adjusted, annualized rate (SAAR).”
  • “We have yet to see the impact of the Federal Open Market Committee (FOMC) decision to reduce the Federal Reserve’s large portfolio of bonds, which will likely push mortgage rates higher in the coming months. This quantitative un-easing will further impact affordability.” 

September 2017 Real House Price State Highlights

  • The five states with the greatest year-over-year increase in the RHPI are: Nevada (+13.2 percent), Delaware (+12.8 percent), Idaho (+12.2 percent), Michigan (+11.7 percent) and Missouri (+10.7 percent).
  • The five states with the smallest year-over-year increase in the RHPI are: Alabama (+1.4 percent), New Mexico (+1.5 percent), Hawaii (+2.0 percent), Arkansas (+2.0 percent) and Washington D.C. (+2.5 percent).   

    September 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 (+16.1 percent), San Jose, Calif. (+15.9 percent), Nashville, Tenn. (+14.2 percent), Seattle (+14.1 percent) and Charlotte, N.C. (+13.8 percent).
  • Among the CBSAs tracked by First American, the five markets with the smallest year-over-year increase in the RHPI are: Pittsburgh (+1.3 percent), Memphis, Tenn. (+4.6 percent), Virginia Beach, Va. (+4.7 percent), San Francisco (+4.8 percent) and Portland, Ore. (+5.4 percent).

    Next Release

    The next release of the First American Real House Price Index will take place the week of December 21, 2017 for October 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