A new report from Black Knight Financial Services showed home prices hit a new high in February, so it comes as no surprise that First American Financial Corp.’s latest report shows affordability slipped during the month.
Real home prices increased 0.7% from January to February, according to First American’s index. This marks an increase of 11% year-over-year.
“The lack of homes listed for sale is causing unadjusted house price growth to remain strong,” First American Chief Economist Mark Fleming said.
“Additionally, increasing interest rates are reducing consumer purchasing power,” Fleming said. “The result is a substantial year-over-year increase in the real price of homes.”
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.
So while Black Knight’s report showed home prices hit an all-new peak, affordability remains well below pre-crisis levels.
According to First American's index, real house prices remained 32.8% below the housing boom peak in July 2006 and 9.7% below the level of prices in January 2000.
“Most of the markets we follow experienced double-digit real house price increases in February, compared with a year ago,” Fleming said. “The main story in most markets this spring is the lack of supply.”
“Combined with unfaltering demand, the lack of supply continues to pressure unadjusted prices higher in one of the strongest spring sellers’ markets seen in recent memory,” he said. “Even so, it’s important to note that wages continue to grow and the level of affordability in most markets remains high by historical standards.”