Real House Prices Up 10.5% In September, But Many Markets Are Cooling

Real house prices jumped 10.5% in September and logged a 60.6% YOY increase, according to First American’s Real House Price Index.

As a result, consumer buying power, or how much a person can buy based on changes in income and interest rates, fell by 8.9% month-over-month and 29.3% YOY.

The significant dip in affordability measured here results from skyrocketing home prices and rapidly increasing mortgage rates.

“Even though household income increased 3.1% since September 2021 and boosted consumer house-buying power, it was not enough to offset the affordability loss from higher mortgage rates and fast-rising nominal prices,” said Mark Fleming, chief economist at First American.

Florida, Georgia, Arkansas, South Carolina, and Alabama saw the largest annual increases in real house prices. No state saw a decrease.

The cities where prices grew the most were Miami, Tampa, Indianapolis, Nashville, and Orlando.

But prices fell in 15 out of the top 50 markets FirstAm analyzes, as high interest rates and home prices force buyers out of the market.

San Francisco saw the largest price decline, down 6.8% from its peak in March 2022. San Jose took second with a 5.9% drop from its April peak.

Pandemic boomtowns have been particularly susceptible to cooling prices. Austin and Phoenix posted increases YOY, but those gains are down by more than 20% from their peaks.

Homeowners who have seen their equity soar to record highs may be nervous about the market correction.

Equity fell by $1.3 trillion in Q3, the largest quarterly drop by dollar value ever recorded “by far.”

But Fleming says homeowners shouldn’t worry about losing all their equity.

“While prices are declining from the peak in these markets, much of the equity homeowners gained during the pandemic remains. For example, in both San Francisco and San Jose, house prices increased 29% from February 2020 to their respective peaks in 2022,” he said.

“House price declines would have to be substantial to eat away at all of the equity that many homeowners have accumulated over the last few years.”

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