Real house prices rose 0.6% between June and July and jumped 10.4% year over year. The index measures price changes of single-family properties and, because it adjusts for house-buying, it also serves as a measure of housing affordability. Consumer house-buying power fell 0.4% between June and July and sank 4.2% year over year.
“Rising rates and rapid price appreciation driven by the lack of supply caused affordability to decline in July,” First American Chief Economist Mark Fleming said. “Based on our RHPI, affordability has declined by more than 10% over the last year. But, the loss in affordability is only significant to potential first-time buyers. Existing homeowners with fixed-rate mortgages benefited from the rising prices with increased equity. Your perspective on rising home prices and affordability largely depends on whether you are a homeowner or not.”
Delaware saw the biggest year-over-year increase in the RHPI at 19.9%. Washington state followed with a 16.3% increase, with Nevada (15.5%), Alaska (15.4%), and Michigan (15%) rounding out the top five. The index fell 3.5% in Missouri year over year, with Arkansas (6.3%), Alabama (6.5%), North Dakota (6.7%), and Oklahoma (7.1%) recording the smallest year-over-year increases.
“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,” Fleming said.
First American: Low inventory drives drop in house price affordability
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Housing was less affordable in July as a lack of supply drove rates and prices higher, according to the Real House Price Index released by First American Financial.