However, consumer homebuying power dipped by 0.04 percent between October 2018 and November 2018 and fell 7.5 percent year-over-year. This occurred while the average household income has increased 3.5 percent since November 2017 and 54.3 percent since January 2000.
“Throughout 2018, consistent growth among three driving forces—mortgage rates, household income, and unadjusted house prices—defined the housing market,” said Mark Fleming, Chief Economist at First American. “November 2018 was no exception, as household income, mortgage rates, and the unadjusted house price index all increased compared with a year ago. The 30-year, fixed-rate mortgage increased by nearly one percent and the unadjusted house price index jumped 6.7 percent. Household income increased 3.5 percent since November 2017, which boosted consumer house-buying power, but the Real House Price Index (RHPI) still increased 15.3 percent compared with last November due to the rise in mortgage rates and unadjusted house prices.”
Fleming added that “six cities are leading the shift in the housing market” with month-over-month declines in the RHPI: San Jose (- 0.7 percent), Boston (- 0.4 percent), Portland (- 0.2 percent), Pittsburgh (- 0.2 percent), San Diego (- 0.1 percent) and Seattle (- 0.1 percent).
“Rising inventory is one reason these markets are bucking the national trend,” Fleming said. “According to Realtor.com, the number of active listings increased year over year in five of the six markets listed. In San Jose, Seattle, and San Diego, the increase in active listings was substantial, as active listings jumped 158 percent, 77 percent, and 46 percent, respectively. “As more inventory enters the market, buyers have more options, bidding wars are less likely and sellers start reducing list prices.”
