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Consumers Gain The Edge in Housing Market Shift

First American Financial Corporation’s Home Price Index (HPI) revealed that consumer home-buying power increased 1.3% in May 2019 and 9.3% year-over-year. 

The HPI states real house prices dropped 0.7% from April to May, and 3.7% year-over-year, while the average household income increased 2.8% since May 2018. Real house prices are 17% less expensive than in 2000. 

The average household income increased to $63,124 and the yearly growth in the real-house-price-index (RHPI) dropped 3.1%. 

Wisconsin had the nation’s highest year-over-year increase in RHPI at 1.5%. Maryland and New Hampshire had a 0.2% increase and Rhode Island recorded a 0.1% jump. Providence, Rhode Island, recorded the highest increase among the Core Based Statistical Areas (CBSAs) tracked at 2.2%. 

The largest decline was North Dakota’s 8.5% drop, which was followed by Wyoming (-8%), California (-7.1%), Arkansas (-5.8%), and New Mexico (-5.7%). San Jose, California, had the largest decline of any CBSA at 13.9%. 

Mark Fleming, First America’s Chief Economist, expects an additional boost to come later this week when the Fed meets to discuss interest rates. 

“Later this week, the Federal Open Market Committee (FOMC) will convene and likely announce a rate cut, according to experts. The first Fed rate cut since December 2008 will trigger industry and media speculation about mortgage rates declining further,” Fleming said. “While changes to the federal funds rate don't directly influence mortgage rates, a rate cut will indicate concern about possible economic weakness and that may increase demand for long-term Treasury bonds, which mortgage rates follow closely.”

Fleming added that the “consensus among economists” is for the 30-year fixed-rate mortgage to decline from 4.4% to an average of 3.9% for the remainder of the year. 

“Additionally, the expectation of lower rates comes during the longest economic boom in history and a continued healthy labor market, prompting the question: what do low mortgage rates and a still booming economy mean for housing?” Fleming said. 

Working under the assumption that mortgage rates fall to 3.7%, Fleming said consumer home-buying power would be 13.3% higher than in July 2018 when the mortgage rate was 4.5%. 

About Author: Mike Albanese

A graduate of the University of Alabama, Mike Albanese has worked for news publications since 2011 in Texas and Colorado. He has built a portfolio of more than 1,000 articles, covering city government, police and crime, business, sports, and is experienced in crafting engaging features and enterprise pieces. He spent time as the sports editor for the "Pilot Point Post-Signal," and has covered the DFW Metroplex for several years. He has also assisted with sports coverage and editing duties with the "Dallas Morning News" and "Denton Record-Chronicle" over the past several years.
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