First American also noted that consumer house-buying power—the measurement of what one can buy based on changes in income and interest rates—fell by 1.9 percent between September and October and was 7.7 percent down from one year earlier. However, average household income has increased three percent since October 2017 and 53.7 percent since January 2000.
“For the second consecutive month, all three key drivers of the Real House Price Index (RHPI), household income, mortgage rates, and the unadjusted house price index, increased compared with a year ago,” said Mark Fleming, Chief Economist at First American. “The 30-year, fixed-rate mortgage and the unadjusted house price index increased by 0.9 percentage points and 7.3 percent respectively. Even though household income increased 3.0 percent since October 2017 and boosted consumer house-buying power, the Real House Price Index increased 16.2 percent compared with last October, the highest yearly growth rate since 2014.”
Fleming added that this year’s housing market was “a victim of the economy’s success. The Federal Reserve is trying to keep inflation in check by increasing short-term interest rates and reducing their holdings of Treasury bonds and mortgage-backed securities. The Fed’s moves have pressured mortgage rates higher and made buying a home more expensive. Meanwhile, the healthy economy and robust labor market in 2018 has supported home buyer demand.”