First American also reported consumer house buying power—which is defined as how much one can buy based on changes in income and the interest rate—was up1.3 percent between May and June but down 3.5 percent year-over-year. Unadjusted house prices increased by 5.4 percent in June on a year-over-year basis and are 2.7 percent above the housing boom peak in 2007.
“On a month-over-month basis, affordability improved slightly thanks to the seventh straight month of falling rates for 30-year, fixed-rate mortgages and modest wage gains,” said Mark Fleming, chief economist at First American. “The increase in consumer purchasing power offset the gains in unadjusted house prices. However, on a year-over-year basis, with rates still higher than a year ago, affordability declined 9.3 percent. The underlying fundamental issue is an overwhelming lack of supply. With current homeowners facing a prisoner’s dilemma and unwilling to list their homes for sale, little relief is expected in the supply of existing homes. The supply of newly constructed homes is also sagging, adding to the supply challenges.”