Rising House-Buying Power Accelerating House Price Appreciation, According to First American Real House Price Index

Faster nominal house price appreciation can erode, or even completely eliminate, the boost in affordability from increasing house-buying power, says Chief Economist Mark Fleming

November 26, 2019, 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 2019 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 2019 Real House Price Index

  • Real house prices increased 0.9 percent between August 2019 and September 2019.

  • Real house prices declined 7.6 percent between September 2018 and September 2019.

  • Consumer house-buying power, how much one can buy based on changes in income and interest rates, increased 0.2 percent between August 2019 and September 2019, and increased 15.8 percent year over year.

  • Median household income has increased 2.5 percent since September 2018 and 57.7 percent since January 2000.

  • Real house prices are 18.8 percent less expensive than in January 2000.

  • While unadjusted house prices are now 8.1 percent above the housing boom peak in 2006, real, house-buying power-adjusted house prices remain 42.2 percent below their 2006 housing boom peak. 

Chief Economist Analysis: Affordability Declined in September Month Over Month

“Two of the three key drivers of the Real House Price Index (RHPI), household income and mortgage rates, modestly swung in favor of increased affordability in September, yet affordability declined month over month,” said Mark Fleming, chief economist at First American. “The 30-year, fixed-rate mortgage fell by 0.01 percentage points and household income increased 0.03 percent compared with August 2019. When household income rises, consumer house-buying power increases. Declining mortgage rates have a similar impact on consumer house-buying power.

“However, nominal house price appreciation jumped 1.1 percent in September, outpacing the benefits of rising house-buying power on affordability. Accordingly, the RHPI increased 0.9 percent month over month. Increases in the RHPI indicate a decline in affordability, and September’s decline in affordability was the largest month-over-month affordability decline since November 2018,” said Fleming. “In 2019, declining mortgage rates have increased house-buying power, fueling greater demand. However, when demand increases for a scarce (limited or low supply) good, prices will rise faster. While year-over-year, the RHPI shows an improvement in affordability, the increase in house-buying power in September was not enough to offset nominal house price gains compared with August.” 

The Five Cities Where Affordability Decreased the Most

“As the old adage goes, real estate is all about ‘location, location, location.’ Of the 44 markets we track, the RHPI increased in 41 of them month over month, meaning affordability declined in each. The rise in the RHPI is a break from the long-term trend in 2019, as all of these markets are significantly more affordable than they were one year ago,” said Fleming. “Nevertheless, the five markets with the greatest month-over-month increases in the RHPI and thus the greatest declines in affordability were:


Monthly Changes


House-Buying Power

Nominal House Price Index


1.) New York, NY




2.) Jacksonville, FL




3.) Providence, RI




4.) Atlanta, GA




5.) Philadelphia, PA





“Affordability declined the most month-over-month in New York City, where the RHPI increased by 1.61 percent. Nominal house prices increased by 1.29 percent, and house-buying power declined by 0.31 percent. Notice that nominal house price appreciation in New York City was less than in some other cities, but the combination with the decline in house-buying power led New York City to top the list in the loss of affordability,” said Fleming. “Nominal house price appreciation grew fastest in Providence, yet the city was third on the list for monthly increase in RHPI and thus decreased affordability. The month-over-month increase in house-buying power in Providence helped mitigate the negative impact from faster house price appreciation on affordability.  

“One month does not make a trend, yet these markets demonstrate the dynamic we expected to see – the consistent growth in house-buying power over 2019 has boosted demand in a supply constrained market, putting upward pressure on house price appreciation. Faster nominal house price appreciation can erode, or even completely eliminate, the boost in affordability from increasing house-buying power,” said Fleming. “Affordability trends are influenced by shifts in house-buying power and nominal home price appreciation. A shift in one or the other is not sufficient to know whether affordability has increased or decreased. The question for 2020 is, where does house-buying power go from here?” 

September Real House Price State Highlights

  • There are no states with a year-over-year increase in the RHPI.

  • The five states with the greatest year-over-year decrease in the RHPI are: New Mexico (-12.1 percent), California (-10.4 percent), Colorado (-9.6 percent), Wyoming (-9.4 percent), and Utah (-9.3 percent). 

    September 2019 Real House Price Local Market Highlights

  • Among the Core Based Statistical Areas (CBSAs) tracked by First American, there are no markets with a year-over-year increase in the RHPI.

  • Among the Core Based Statistical Areas (CBSAs) tracked by First American, the five markets with the greatest year-over-year decrease in the RHPI are: San Jose, Calif. (-15.0 percent), San Francisco (-12.4 percent), Portland, Ore. (-11.3 percent), Los Angeles (-10.4 percent), and Denver (-10.3 percent). 

    Next Release

    The next release of the First American Real House Price Index will take place the week of December 30, 2019 for October 2019 data. 




The methodology statement for the First American Real House Price Index is available at http://www.firstam.com/economics/real-house-price-index


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. © 2019 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; banking, trust and wealth management services; and other related products and services. With total revenue of $5.7 billion in 2018, the company offers its products and services directly and through its agents throughout the United States and abroad. In 2019, First American was named to the Fortune 100 Best Companies to Work For® list for the fourth consecutive year. More information about the company can be found at www.firstam.com.



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