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Is Home Price Appreciation at the Tipping Point?

Home price appreciation is slowing and may be close to a “tipping point,” according to the First American Real House Price Index. The June 2018 Real House Price Index showed that home prices increased by 1.5 percent between April 2018 and May of 2018. On a year-over-year basis, they increased by 11.4 percent.

“We’re seeing the first indications that price appreciation may be slowing, but the underlying fundamental housing market conditions support a natural moderation of house prices rather than a sharp decline,” says First American Chief Economist Mark Fleming.

Consumer house-buying power fell one percent between April and May of this year, and 3.6 percent year over year. Fleming notes that the current housing market is different than the previous housing boom. While many may believe this may lead to another recession, Fleming says otherwise.

“The low inventory, combined with income and employment growth, tighter mortgage underwriting, and strong economic fundamentals, fuels price appreciation that is very different than the price appreciation during the housing boom that peaked in 2006,” said Fleming. “Today, house prices are rising because of a lack of supply of homes for sale, near record-low mortgage rates and the strong underlying economic fundamentals of the second longest expansion in U.S. history.”

House-buying power has increased by around 55 percent since 2006 while prices are just 1.3 percent higher over the same period. Fleming believes that the strong economy will prevent the tipping point from turning into a recession.

“As buyers pull back from the market and sellers adjust their price expectations, house prices will adjust, but the strong economic conditions and the shortage of supply relative to demand continue to support the housing market,” said Fleming. “We’re seeing the first indications that price appreciation may be slowing, but the underlying fundamental housing market conditions support a natural moderation of house prices rather than a sharp decline.”

Find the full story and Fleming’s comments here.

About Author: Seth Welborn

Seth Welborn is a Harding University graduate with a degree in English and a minor in writing. He is a contributing writer for MReport. An East Texas Native, he has studied abroad in Athens, Greece and works part-time as a photographer.

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