—The housing market in 2018 will be similar to the strong sellers’ market we experienced in 2017, says Chief Economist Mark Fleming—

SANTA ANA, Calif.--(BUSINESS WIRE)-- First American Financial Corporation (NYSE: FAF), a leading global provider of title insurance, settlement services and risk solutions for real estate transactions, today released the October 2017 First American Real House Price Index (RHPI). 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.

October 2017 Real House Price Index

• Real house prices increased 0.9 percent between September and October.
• Real house prices increased 8.6 percent year over year.
• Consumer house-buying power, how much one can buy based on changes in income and interest rates, decreased 0.8 percent between September and October and fell 2.8 percent year over year.
• Real house prices are 38.2 percent below their housing boom peak in July 2006 and 16.9 percent below the level of prices in January 2000.
• Unadjusted house prices increased by 5.5 percent in October on a year-over-year basis and are 5.1 percent above the housing boom peak in 2007.

Chief Economist Analysis: Tight Supply Continues to be a Drag on Affordability

“Over the past 12 months, affordability has declined as unadjusted house prices have increased faster than buying power and demand has continued to outpace supply. Existing homeowners are increasingly prisoners in their own homes, as the fear of not being able to find something to buy prevents homeowners from putting their homes on the market, limiting the supply of existing homes for sale. At the same time, first-time homebuyers, enticed by low mortgage rates, continue to enter the market, adding demand,” said Mark Fleming, chief economist at First American. “Homebuilders are also struggling to add more new-home inventory. Looking forward, the long and short (supply) of it is that the housing market in 2018 will be similar to the strong sellers’ market we experienced in 2017.”

Additional Quotes from Chief Economist Mark Fleming

• “According to Realtor.com, October marked the 38th consecutive month of year-over-year declines in inventory levels. The lack of supply is driving unadjusted house prices higher.”
• “Both sources of future housing supply, new home building and the sale of existing homes, are not meeting market demand. The pace of new home building faces headwinds, and the fear of not being able to find something to buy is preventing homeowners from putting their homes on the market. Homeowners are increasingly becoming prisoners in their own homes.”
• “The rise in mortgage rates over the past year and slow income growth have prompted a decline in consumer house-buying power. Strong unadjusted house price growth coupled with the decline in house-buying power means affordability has suffered, falling 8.6 percent compared with a year ago.”
• “As the housing supply is expected to remain tight and mortgage rates are expected to rise in 2018, affordability is likely to continue to decline.”

October 2017 Real House Price State Highlights

• The five states with the greatest year-over-year increase in the RHPI are: Delaware (+18.2 percent), Idaho (+14.9 percent), Nevada (+14.9 percent), New York (+13.6 percent) and Missouri (+13.5 percent).
• The five states with the smallest year-over-year increase in the RHPI are: Alabama (+1.2 percent), Arkansas (+3.2 percent), Maryland (+3.4 percent), Vermont (+3.5 percent) and Hawaii (+4.0 percent).

October 2017 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: San Jose, Calif. (+18.7 percent), Las Vegas (+17.4 percent), Seattle (+15.8 percent), Charlotte, N.C. (+14.4 percent) and Nashville, Tenn. (+14.4 percent).
• Among the CBSAs tracked by First American, the five markets with the smallest year-over-year increase in the RHPI are: Pittsburgh (+0.5 percent), Memphis, Tenn. (+6.3 percent), Virginia Beach, Va. (+6.8 percent), Portland, Ore. (+6.9 percent) and Riverside, Calif. (+7.0 percent).

Next Release

The next release of the First American Real House Price Index will take place the week of January 29, 2018 for November 2017 data.

Methodology

The methodology statement for the First American Real House Price Index is available at http://www.firstam.com/economics/real-house-price-index.

Disclaimer

Opinions, estimates, forecasts and other views contained in this page are those of First American’s Chief Economist, do not necessarily represent the views of First American or its management, should not be construed as indicating First American’s business prospects or expected results, and are subject to change without notice. Although the First American Economics team attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. © 2017 by First American. Information from this page may be used with proper attribution.

About First American

First American Financial Corporation (NYSE: FAF) is a leading provider of title insurance, settlement services and risk solutions for real estate transactions that traces its heritage back to 1889. First American also provides title plant management services; title and other real property records and images; valuation products and services; home warranty products; property and casualty insurance; and banking, trust and investment advisory services. With total revenue of $5.6 billion in 2016, the company offers its products and services directly and through its agents throughout the United States and abroad. In 2016 and again in 2017, First American was named to the Fortune 100 Best Companies to Work For^® list. More information about the company can be found at www.firstam.com.

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Source: First American Financial Corporation