Home Prices Fall Nearly 6% Year-Over-Year

First American Financial Corporation Real House Price Index (RHPI) found real house prices between the first month of 2020 to February of 2020 fell 1.6%, while the previous year’s same window of time saw real house prices fall 5.8%.

The RHPI studies data regarding the price fluctuations in single-family listings across the nation (all of which have been adjusted for the impact of income and interest rate changes on consumer house-buying power over time at national, state, and metropolitan area levels.)

As far as consumer house-buying power—the measure of what buyers can afford based on fluctuations in their individual earnings and changing interest rates—rose 2.5% between January 2020 and February 2020, while also raising 14.6% year-over-year.

Based on the data revealed, it appears that house price appreciation in America has peaked, reaching a proverbial tipping point on the housing industry scales. 

According to First American Chief Economist Mark Fleming, things are not as bad as some may fear, even amid the pandemic. 

Fleming explained: “Compared with February 2019, the 30-year, fixed-rate mortgage fell by 0.9 percentage points. So, consumer house-buying power–how much one can buy based on changes in income and interest rates–continued to grow, boosting affordability and working offsetting the negative impact from rising house price appreciation.”

The average income for American households rose 2.7% since February 2019, and since January 2000, it has grown by 60%. Real house prices were revealed to have fallen 19.8% from their price tags in January 2000.

Fleming further commented on how the changing dynamics of supply and demand will most likely impact house prices: “As buyers and sellers pull back from the market and some sellers adjust their price expectations, it’s reasonable to expect a reduction in home sales and moderation in house price appreciation in this year’s spring home-buying season. Yet, transactions will continue to occur. The housing market may be down, but it may be better positioned than many believe.”