First American Financial Corporation's Real House Price Index (RHPI) indicates a drop in affordability due to the surge in nominal house prices and mortgage rates during June.
“Consumer house-buying power declined by nearly $9,000 compared with May and remains $32,000 lower than one year ago. The outlook for house-buying power is heavily dependent on the path for mortgage rates, and that path is highly uncertain," Mark Fleming, chief economist at First American, said.
Fleming added that increasing mortgage rates are not helping. "As of mid-August, the average mortgage rate nationally sits at approximately 7%. In June of last year, the average mortgage rate nationally was roughly 5.5%. Holding incomes constant at their June 2023 level and assuming a 5% down payment, the increase in mortgage rates alone reduced house-buying power by nearly $57,000," he said.
Key Highlights from the June 2023 RHPI:
- Real house prices increased 3.4% between May 2023 and June 2023.
- Real house prices increased 12.4% between June 2022 and June 2023.
- Consumer house-buying power decreased by 2.6% between May 2023 and June 2023 and decreased by 8.6 percent year over year.
- Median household income increased by 3.8% since June 2022 and 82.7% since January 2000.
- Real house prices are now 41.1% more expensive than in January 2000.
- Unadjusted house prices stand at 52.2% above the housing boom peak in 2006, while real, house-buying power-adjusted house prices remain 1.3% below their 2006 housing boom peak.
The state and local market highlights reveal significant year-over-year increases in RHPI in various regions, reflecting the ongoing challenges in housing affordability across the United States.