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Consumer Home Buying Power Receives a Boost

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First American’s Real House Price Index (RHPI) reported Monday that although real house prices increased 0.5% in July, consumer house-buying power increased 0.5% month-to-month and 12.2% annually. 

During that same period, real-house prices declined 3.8% between July 2018 and July 2019. The average household income increased 2.4% since last year and nearly 57% since January 2000.

Mark Fleming, Chief Economist at First American, said fall is not only the beginning of school, but also the end of the home-buying season. This year, Fleming said, the housing market received passing grades on affordability. 

According to DataTree by First American, 57% of all housing transactions occurred between March and August 2018

“Between March and July 2019, overall affordability improved 2.7%. Consumer house-buying power fueled the affordability growth, increasing to $410,271, a 6.7% gain since the start of the home-buying season in March,” said Fleming. “Mortgage rates continued their spring swoon in July, falling to 3.77%, 0.5-percentage points lower than March.

“The decline in mortgage rates alone increased house-buying power by $23,900 since March 2019. Over the same period, household income grew by 0.4%, boosting consumer house-buying power by $1,600.”

Overall, Fleming said, consumer house-buying power grew by $25,500 in July compared to March. 

“Once again, the growth in purchasing power was more than enough to offset the 3.8% gain in nominal house prices over the same time. So, nationally, affordability did spring forward during the 2019 home-buying season,” he said. 

Affordability increased in the 44 markets tracked by First AM. San Jose, California, saw the largest increase at 8.04%. St. Louis, Missouri, reported a 7.45% increase in affordability, followed by Hartford, Connecticut (7.43%); and Salt Lake City, Utah (7.35%). 

“In a housing market with limited supply, a surge in demand from home buyers trying to take advantage of rising house-buying power can drive faster price appreciation, making further affordability gains more difficult,” Fleming said. 

Rhode Island was the only stated to report a year-over-year increase in RHPI at 7%. The five states with the highest annual decreases in RHPI were North Dakota (-9.7%); California (-9.1%); Wyoming (-9%); West Virginia (-8.7%); and New Mexico (-8.4%). 

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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