—The shift in affordability was driven primarily by rising mortgage rates. However, while rates are increasing, they remain very low from a historical standpoint, 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 November 2016 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 and across the United States at national, state and metropolitan area levels. Because the RHPI adjusts for house-buying power, it also serves as a measure of housing affordability.

November 2016 Real House Price Index

• Real house prices increased 4.4 percent between October 2016 and November 2016.
• Compared to November 2015, real house prices increased by 1.7 percent.
• Unadjusted house prices are expected to increase by 5.4 percent in November on a year-over-year basis.
• Real house prices are 37.1 percent below their housing-boom peak in July 2006 and 15.5 percent below the level of prices in January 2000.
• Unadjusted, the national price level is 0.6 percent above the housing-boom peak in 2007.

Chief Economist Analysis: Rising Rates and Strong Nominal Price Growth Overcome Increasing Wages to Halt Six-Month Run of Increasing Housing Affordability

“Real purchasing-power adjusted house prices jumped 4.4 percent month-over-month, reversing a six-month trend of decreases. Year-over-year, real house prices have increased two percent. The shift in real house prices signals a decrease in affordability, driven primarily by rising mortgage rates. However, while rates are increasing, they remain very low from a historical standpoint,” said Mark Fleming, chief economist at First American. “In contrast, meaningful gains in wages help offset some of the decrease in affordability. Even as rates rise above 4 percent, housing, on a purchasing-power adjusted basis, continues to be as affordable as it was almost 18 years ago in April 1999.

“We saw a widespread decrease in affordability in November, as all but three of the 43 major markets First American tracks saw increasing year-over-year growth in real house prices. Yet, my research suggests that rising mortgage rates will, over time, moderate price growth more into alignment with the current pace of income growth,” said Fleming. “While affordability has declined compared to a year ago, housing is still as affordable as it was nearly two decades ago.”

Additional Quotes from Chief Economist Mark Fleming

• “Real purchasing-power adjusted house prices increased on a year-over-year basis in the month of November, after six consecutive months of declines as mortgage rates increased after the conclusion of the presidential election and in anticipation of the December Federal Open Market Committee (FOMC) meeting.”
• “Wages moderated slightly, growing 2.5 percent year-over-year in November, which is down from a 2.8 percent year-over-year pace of growth in October.”
• “While there has not been consistent wage growth above 2.5 percent since the summer of 2009, it was not enough to counteract the upward pressure on real house prices in most local housing markets caused by the post-election increase in mortgage rates and unadjusted house price growth. However, housing continues to be as affordable as it was almost two decades ago.”
• “Real house prices increased on a year-over-year basis in 40 of the 43 metropolitan areas tracked by First American, as the low number of homes for sale in many markets and rising rates dampened potential home sales and pushed unadjusted prices higher.”
• “Virginia Beach, Va.; San Jose, Calif.; and San Francisco were the only metropolitan areas to experience improved affordability, as a combination of flat house price growth and faster rising incomes in each city offset the increased mortgage rate.”

November 2016 Real House Price State Highlights

• The five states with the highest year-over-year increase in the RHPI are: Missouri (+6.8 percent), Illinois (+6.6 percent), Colorado (+6.6 percent), Maine (+6.5 percent) and Vermont (+6.2 percent).
• The five states with the highest year-over-year decrease in the RHPI are: New Jersey (-2.7 percent), Mississippi (-2.0 percent), Iowa (-2.0 percent), Montana (-1.2 percent) and North Dakota (-0.9 percent).

November 2016 Real House Price Local Market Highlights

• Among the largest 50 Core Based Statistical Areas (CBSAs), the five markets with the highest year-over-year increase in the RHPI are: Charlotte, N.C. (+13.9 percent); Jacksonville, Fla. (+12.9 percent); Tampa, Fla. (+10.5 percent); Detroit (+9.1 percent); and Columbus, Ohio (+8.3 percent).
• Among the largest 50 CBSAs, the three markets with a year-over-year decrease in the RHPI are: Virginia Beach, Va. (-1.5 percent); San Jose, Calif. (-1.0 percent); and San Francisco (-0.5 percent).

Next Release

The next release of the First American Real House Price Index will be the week of February 27, 2017 for December 2016 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 revenues of $5.2 billion in 2015, the company offers its products and services directly and through its agents throughout the United States and abroad. In 2016, First American was recognized by Fortune^® magazine as one of the 100 best companies to work for in America. More information about the company can be found at www.firstam.com.

View source version on businesswire.com: http://www.businesswire.com/news/home/20170130005353/en/

Source: First American Financial Corporation