Homebuyers in June 2021 had 129 percent more house-buying power than in 2006, according to the June 2021 First American Real House Price Index (RHPI), released today.
“House-buying power, how much one can buy based on changes in income and interest rates, increased by 6.8 percent in June compared with a year ago, propelled by lower mortgage rates and higher household income,” said Mark Fleming, chief economist at First American Financial Corporation, which releases the RHPI. First American is a leading global provider of title insurance, settlement services, and risk solutions for real estate transactions.
“The affordability gain from increased house-buying power, however, was offset by the third component of the RHPI, nominal house price appreciation, which reached a record 19 percent compared with a year ago, eclipsing the record for price appreciation of 17.5 percent set in 2005,” he said. “Indeed, nominal house prices in June were 32 percent higher than at the housing boom peak for prices in 2006, but that’s not the whole story.”
The RHPI measures the price changes of single-family properties throughout the U.S. adjusted for the impact of income and interest rate changes on consumer house-buying power over time at national, state and metropolitan area levels. Because the RHPI adjusts for house-buying power, it also serves as a measure of housing affordability.
Fleming predicted that the record-setting price appreciation will result in moderation, not a bust.
“As buyers pull back from the market and sellers adjust their price expectations, house prices will adjust, but the shortage of supply relative to demand will continue to keep house price appreciation positive,” he said.
“Today, the underlying fundamentals driving the housing market signal that booming house prices are poised to gradually moderate rather than bust.”
Here are some highlights from the report:
June 2021 Real House Price Index Highlights
- Real house prices increased 1.9 percent between May 2021 and June 2021.
- Real house prices increased 11.6 percent between June 2020 and June 2021.
- Consumer house-buying power — how much one can buy based on changes in income and interest rates — decreased 0.03 percent between May 2021 and June 2021, and increased 6.8 percent year over year.
- Median household income has increased 4.3 percent since June 2020 and 77.6 percent since January 2000.
- Real house prices are 18.1 percent less expensive than in January 2000.
- While unadjusted house prices are now 32.4 percent above the housing boom peak in 2006, real, house-buying power-adjusted house prices remain 42 percent below their 2006 housing boom peak.
June 2021 Real House Price State Highlights
- The five states with the greatest year-over-year increase in the RHPI are: Arizona (+23.3 percent), Vermont (+21.4 percent), Nevada (+20.9 percent), Connecticut (+19.2 percent), and Rhode Island (+17.8 percent).
- There were no states with a year-over-year decrease in the RHPI.
June 2021 Real House Price Local Market Highlights
- Among the Core Based Statistical Areas (CBSAs) tracked by First American, the five markets with the greatest year-over-year increase in the RHPI are: Phoenix (+27.3 percent), Kansas City, Mo. (+22.6 percent), Las Vegas (+22.3 percent), Seattle (+20.5 percent), and Tampa, Fla. (+19.8 percent).
- Among the Core Based Statistical Areas (CBSAs) tracked by First American, there were no markets with a year-over-year decrease in the RHPI.