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Cities Bucking National Home Price Trends

Home prices decreased 1.3% between July 2019 and August 2019, according to the latest First American Real House Price Index [1] (RHPI), while year over year, real house prices declined 5.9%. Meanwhile, the S&P CoreLogic Case-Shiller Indices [2] revealed that the biggest year over year gains in home prices were in Phoenix, Charlotte, and Tampa.

Phoenix led the way with a 6.3% year-over-year price increase, followed by Charlotte with a 4.5% increase and Tampa with a 4.3% increase. Seven of the 20 cities reported greater price increases in the year ending August 2019 versus the year ending July 2019.

“The U.S. National Home Price NSA Index trend remained intact with a year-over-year price change of 3.2%” says Philip Murphy, Managing Director and Global Head of Index Governance at S&P Dow Jones Indices. “However, a shift in regional leadership may be underway beneath the headline national index.”

According to First American, unadjusted house prices are now 8.3% above the housing boom peak in 2006, real, house-buying power-adjusted house prices remain 42.0 percent below their 2006 housing boom peak. 

“Understanding the dynamics that influence consumer house-buying power, how much home one can buy based on changes in income and interest rates, provides a helpful perspective on the housing market. When incomes rise, consumer house-buying power increases. When mortgage rates or nominal house prices rise, consumer house-buying power declines,” said Mark Fleming, Chief Economist at First American. “Our RHPI uses consumer house-buying power to adjust nominal house prices, offering insight into affordability.

Fleming goes on to discuss how the latest RHPI reflects affordability.

“For example, according to our RHPI, real house prices decreased nearly 6% year over year in August, marking a significant gain in affordability. Since August 2018, mortgage rates decreased 0.93-percentage points and household income grew by 2.6%–both improving house-buying power and affordability,” Fleming continued. “However, rising nominal house prices reduce affordability, and nominal house price appreciation grew by 8.0% compared with one year ago. Ultimately, this continual ‘tug-of-war’ between house-buying power and nominal house prices determines the fate of real house prices.”