Home Prices Increase 1.5% Month-Over-Month and 21.0% Year-Over-Year in November, According to First American Financial Corporation

First American Financial Corporation, a leading global provider of title insurance, settlement services, and risk solutions for real estate transactions, on Monday (1-24-22) released the November 2021 First American Real House Price Index (RHPI). The RHPI measures the price changes of single-family properties throughout the U.S. adjusted for the impact of income and interest rate changes on consumer house-buying power over time at national, state, and metropolitan area levels.

According to First American, the three key points of the First American RHPI are income, mortgage rates, and an unadjusted house price index. Incomes and mortgage rates are used to inflate or deflate unadjusted house prices in order to better reflect consumers’ purchasing power and capture the true cost of housing.

In November’s RHPI, First American found that real house prices increased by 1.5% from October and were up 21.0% year-over-year. It also found that the average house now costs $475,180 up $2,818 from $472,362 in October, while the average household income is $69,807, up by $414 from $69,393.

In a statement prepared for the release of the RHPI, Mark Fleming First American’s Chief Economist said, “In November, year-over-year nominal house price appreciation reached 21.5%, the sixth consecutive month it has set a new record. According to our Real House Price Index — which measures housing affordability based on changes in income, interest rates, and nominal house prices — affordability declined 21.0% compared with a year ago, as the growth in nominal house prices combined with the 30-basis point increase in the 30-year, fixed mortgage rate vastly outpaced the 4.4% increase in income. Affordability is likely to decline further in 2022, because both mortgage rates and nominal house prices are expected to rise.”

Late last year, the Federal Reserve signaled through a series of monetary moves that interest rates will be rising this year in the face of declining affordability and rising inflation. This period of “easy money” could end as soon as March. Still, mortgage rates remained flat between October and November sitting at 3.1%.