Housing affordability improved in January as mortgage rates held steady, according to the Real House Price Index from First American Financial Corp., a provider of title insurance, settlement services and risk solutions for real estate transactions.
Real home prices decreased 0.1% from December, but increased 8.2% from January 2016.
“Real purchasing-power adjusted house prices declined 0.1% in January, as mortgage rates did not meaningfully change and income growth continued,” First American Chief Economist Mark Fleming said. “Despite the monthly increase in affordability and continued strong wage growth, homes are less affordable across the country compared to a year ago.”
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. Because the RHPI adjusts for house-buying power, it also serves as a measure of housing affordability.
And consumers became more empowered in January as home-buying power — how much homebuyers can afford based on changes in income and interest rates — increased 0.6% from December to January, but fell 2.3% annually.
Unadjusted home prices, on the other hand, increased 5.7% in January from last year, according to the index.
“Almost half of the markets we track saw double-digit affordability declines in January, compared with a year ago,” Fleming said. “The low inventory of homes for sale across much of the country is creating increased competition and setting the stage for a very robust sellers’ market this spring.”
“While affordability is lower compared to a year ago, the level of affordability in most markets is still high by historical standards, which is why demand is expected to remain strong this spring,” he said.