Housing Affordability in September Slips to Its Lowest Level Since 2008, Yet Homes Remain Undervalued in Most Markets

First American Financial Corporation, the Santa Ana, California-based comprehensive title insurance protection and professional settlement services provider, has released it Real House Price Index (RHPI) for September 2021. According to the RHPI, real house prices increased 1.7% from August to September and 17.5% year-over-year.

The RHPI also identified that house-buying power decreased -0.2% from August but was still up 2.9% year-over-year. The report found that household income has increased 3% since September 2020 and 66.2% since January 2000 when the index was benchmarked at 100.

In a statement prepared for the release of the September RHPI, Mark Fleming, Chief Economist at First American said, “According to the Real House Price Index, which measures housing affordability in the context of changes in consumer house-buying power, affordability in September declined to its lowest level since 2008. Two of the three components of consumer house-buying power swung toward declining affordability. Record nominal house price growth and rising mortgage rates outpaced the growth in household income.”

Fleming added that, “The 30-year, fixed mortgage rate and the unadjusted house price index increased by 0.01 percentage points and 20.9%, respectively on a year-over-year basis. Even though household income increased 3.0% since September 2020 and boosted consumer house-buying power, the RHPI increased 17.5% compared with last September, the highest yearly growth rate since 2014.”

Fleming concluded that, “It may be hard to believe but, once adjusted for consumer house-buying power, housing is undervalued in most markets and the gap between house-buying power and median sale prices indicates there remains room for continued house price growth.”


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Affordability in September Declines to Lowest Level Since 2008