Supply Squeeze Tightens Grip on Affordability in July, According to First American Real House Price Index

Supply continues to tighten, leading to affordability declines in all of the markets tracked by First American, says Chief Economist Mark Fleming

September 26, 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 July 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.

July 2017 Real House Price Index

  • Real house prices increased 0.6 percent between June and July.
  • Real house prices increased by 10.4 percent year-over-year.
  • Consumer house-buying power, how much one can buy based on changes in income and interest rates, decreased 0.4 percent between June and July, and fell 4.2 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 5.8 percent in June on a year-over-year basis and are 3.4 percent above the housing boom peak in 2007.

Chief Economist Analysis: Affordability Sags in July Due to Rising Rates and Increasing Nominal Prices

“Rising rates and rapid price appreciation driven by the lack of supply caused affordability to decline in July. Based on our RHPI, affordability has declined by more than 10 percent over the last year. But, the loss in affordability is only significant to potential first-time buyers,” said Mark Fleming, chief economist at First American. “Existing homeowners with fixed-rate mortgages benefited from the rising prices with increased equity. You’re perspective on rising home prices and affordability largely depends on whether you are a homeowner or not.

“As mortgage rates rise 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, which marked the 27th consecutive month of falling 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.”
  • “Higher interest rates, which increased slightly to 3.97 percent, combined with rising unadjusted house prices, reduced affordability by 0.6 percent in July compared to June.”
  • “Last week, the 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.”

July 2017 Real House Price State Highlights

  • The five states with the greatest year-over-year increase in the RHPI are: Delaware (+19.9 percent), Washington (+16.3 percent), Nevada (+15.5 percent), Alaska (+15.4 percent), and Michigan (+15.0 percent).
  • The five states with the smallest year-over-year increase in the RHPI are: Missouri (-3.5 percent), Arkansas (+6.3 percent), Alabama (+6.5 percent), North Dakota (+6.7 percent), and Oklahoma (+7.1 percent).   

    July 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: Seattle (+20.4 percent), Nashville, Tenn. (+20.1 percent), Charlotte, N.C. (+17.9 percent), Las Vegas (+17.7 percent), and San Jose, Calif. (+16.9 percent).
  • Among the CBSAs tracked by First American, the five markets with the smallest year-over-year increase in the RHPI are: Pittsburgh (+4.1 percent), Virginia Beach, Va. (+6.6 percent), St. Louis (+7.3 percent), Hartford, Conn. (+8.5 percent), and Riverside, Calif. (+9.0 percent).

    Next Release

    The next release of the First American Real House Price Index will be the week of October 23, 2017 for August 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