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California Dreamin’ Leading a Buyers Market

New Home Sales

Real house prices increased 2.9% year-over-year while the consumer house-buying power has increased 2.4% year-over-year, according to First American Financial Corporation’s February Real Housing Price Index (RHPI).

The consumer house-buying power, which is how much one can buy based on changes in income and interest rates, increased 1% from January to February 2019.

“Throughout 2018, consistent growth among three driving forces—mortgage rates, household income and unadjusted house prices—defined the housing market. These three factors are also the core elements of the [RHPI],” said Mark Fleming, Chief Economist at First American. “While household income rose steadily in 2018, rising mortgage rates offset any affordability benefit for home buyers, as illustrated by 11.1% year-over-year growth in the RHPI. However, the first quarter of 2019 has been friendly to potential home buyers, as declining mortgage rates, ongoing household income growth and moderating unadjusted home prices has boosted affordability.”

Despite real house prices increasing 2.9% from 2018, conditions for potential home buyers looks to be favorable, as the RHPI reports that the average household income increased 2.8% since February of 2018. The RHPI states that real house prices are 14% less expensive than in January 2000.

“In February, mortgage rates fell 0.9 percentage points compared with the previous month and were only 0.04 percentage points higher than one year ago. Flat mortgage rates are a welcome change for home buyers following 2018 and the 2.8% year-over-year growth in household income helped boost affordability,” Fleming said.

The market that is leading the nation for potential home buyers is California, as four cities—San Jose, Los Angeles, San Francisco and San Diego—where among six whose RHPI decreased and affordability increased.

Seattle, Washington, saw its affordability increase by 4.5% and Portland, Oregon, saw an increase in affordability of 1.1%.

According to First American calculations of realtor.com in February 2019, the number of listings in San Jose, Seattle and SanFrancisco increased 124%, 89% and 53%, respectively, from 2018.

New Hampshire (8.1%), Wisconsin (7.8%), Rhode Island (6.5%), Ohio (6%) and Georgia (6%) saw the largest year-over-year increases in the RHPI. Wyoming led the nation in the largest decrease in RHPI at 6%.  

About Author: Mike Albanese

Mike Albanese is a reporter for DS News and MReport. He is a University of Alabama graduate with a degree in journalism and a minor in communications. He has worked for publications—both print and online—covering numerous beats. A Connecticut native, Albanese currently resides in Lewisville.
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