The First American Real House Price Index (RHPI), which measures the price changes of single-family properties throughout the U.S., fell slightly in June from a month earlier and a year ago, First American Financial Corp. reported.
Because the RHPI adjusts for house-buying power, it also serves as a measure of housing affordability.
“Counter to the conventional wisdom that housing is becoming less affordable in most markets, many house-hunters reaped the benefit of improving affordability in June,” First American Chief Economist Mark Fleming said in the news release.
The RHPI decreased slightly in June 2016, falling -0.2 percent compared with May and -0.1 percent compared with a year ago.
“Unadjusted house prices are expected to increase by 5.1 percent in June on a year-over-year basis,” Fleming said. “After adjusting for increased consumer house-buying power, real house prices are significantly lower than they were prior to the housing boom. Real house prices are 38.5 percent below their housing-boom peak in July 2006 and 17.3 percent below the level of prices in January 2000. Unadjusted, the national price level is 2.6 percent away from the housing-boom peak in 2007.”
Fleming also pointed out that the monetary stimulus and negative interest rate policies of several central banks outside the U.S. continue to drive demand for U.S. Treasury bonds as investors search for positive yields, despite abating concerns over the fallout from Brexit. As a result, the yields on U.S. Treasuries remain at depressed levels and are keeping U.S. mortgage rates at record low levels.
“These historically low mortgage rates and surging house-buying power are contributing to gains in affordability that many people overlook,” he said.
The five states with the highest year-over-year increase in the RHPI are: Wyoming (+7.0 percent), Nevada (+4.8 percent), North Dakota (+4.6 percent), Michigan (+3.7 percent) and Delaware (+2.4 percent).
The five states with the highest year-over-year decrease in the RHPI are: Mississippi (-7.0 percent), New Jersey (-6.0 percent), Iowa (-5.8 percent), Nebraska (-5.6 percent) and North Carolina (-5.2 percent).
Among the largest 50 Core Based Statistical Areas (CBSAs), the five markets with the highest year-over-year increase in the RHPI are: Jacksonville, Fla. (+10.3 percent), Tampa, Fla. (+6.5 percent), Charlotte, N.C. (+4.1 percent), Sacramento, Calif. (+3.5 percent), and Orlando, Fla. (+3.3 percent).
Among the largest 50 CBSAs, the five markets with the highest year-over-year decrease in the RHPI are: Virginia Beach, Va. (-4.9 percent), Oklahoma City (-3.4 percent), Washington, D.C. (-3.2 percent), San Francisco (-3.0 percent), and Milwaukee (-2.9 percent).
“Real house prices declined on a year-over-year basis in 27 of the 43 metropolitan areas tracked by First American, as increases in consumer house-buying power were sufficient to more than offset unadjusted price appreciation,” Fleming said. “Counter to the conventional wisdom that housing is becoming less affordable in these markets, many house-hunters reaped the benefit of improving affordability in June.”