In February, home prices declined 0.4%, but rose 2.9% year over year, according to First American’s Real House Price Index.
According to First American’s data, unadjusted house prices now sit 2.3% above the housing boom peak. However, consumer buying power has increased 1% between January and February, rising 2.4% from the previous year.
This means when consumer home buying power is factored in, home prices actually sit 39% below their 2006 peak and 14% below prices from January 2000.
First American Chief Economist Mark Fleming said these signs indicate the market is now shifting in the favor of homebuyers.
“While household income rose steadily in 2018, rising mortgage rates offset any affordability benefit for homebuyers, as illustrated by 11.1% year-over-year growth in the RHPI,” Fleming said. “However, the first quarter of 2019 has been friendly to potential homebuyers, as declining mortgage rates, ongoing household income growth and moderating unadjusted home prices have boosted affordability.”
In fact, the pace of annual house appreciation slowed to 5.4% in February, falling from 7.1% in 2018. As a result, real house price appreciation fell to 2.9%, marking the slowest year-over-year pace since December 2017, according to Fleming.
Although housing markets across the country have been impacted by this deprecation, the report claims the West Coast has taken the biggest hit.
“While we know that rising household income and a decline in mortgage rates caused real house price appreciation to slow nationally, real house prices declined in a few markets,” Fleming said. “Compared with a year ago, six cities saw year-over-year declines in the RHPI, signaling an improvement in affordability.
These cities experienced annual declines:
- San Jose declined 5.5%
- Seattle declined 4.5%
- San Francisco declined 2.1%
- Los Angeles declined 1.6%
- Portland declined 1.1%
- San Diego declined 0.3%
“These six markets may signal a broader shift in the housing market. Across the nation, homebuyers are benefiting from lower-than-anticipated mortgage rates, rising wages and a slowdown in unadjusted house price appreciation,” Fleming said. “Only the six markets above showed a year-over year decline in the RHPI, but 37 out the 44 top markets that we track showed month-over-month declines in the RHPI in February.”