By Kelsey Ramírez
The housing market became more affordable in April for the first time in months, according to the Real House Price Index from First American Financial Corp., a provider of title insurance, settlement services and risk solutions for real estate transactions.
Real home prices dropped 1.6% from March to April, the RHPI showed. However they were still up 11% from last year.
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. Because the RHPI adjusts for home-buying power, it also serves as a measure of housing affordability.
“Despite the monetary tightening policies of the Federal Reserve, a dip in the average rate for a 30-year, fixed-rate mortgage and wage gains increased consumer house-buying power sufficiently to offset the gain in unadjusted house prices,” First American Chief Economist Mark Fleming said. “The decline in real, purchasing-power adjusted house prices between March and April was the largest month-over-month decline since July 2016.”
A new report from Black Knight Financial Services, a technology company, showed home prices increased to an all-time high in April to $275,000.
Consumer home-buying power, or how much homebuyers can buy based on changes in income and the interest rate, increased 0.4% monthly in April, but is still down 4.5% from last year.
While different measures of home prices place them nearing their previous peaks or even at all-time highs, First American shows real home prices are a full 33.6% below their housing boom peak in July 2006 and 10.8% below January 2010.
“While this is welcome news for homebuyers, the number of homes listed for sale is not meeting consumer demand and markets are getting tighter,” Fleming said. “As a result, affordability declined 11% on a year-over-year basis.”
“That’s a bigger drop in affordability than the 5.7% caused by unadjusted house-price appreciation alone and reflects the impact of rising interest rates and tightening supply,” he said.
But this increase in affordability won’t last long. First American explained the lack of housing supply will continue to push home prices up.
“Global uncertainty brought down the yield on the 10-year Treasury bill between March and April, which countered the Federal Reserve’s domestic monetary policy,” Fleming said. “The beneficial impact on consumer house-buying power brought widespread relief to the housing market, as all but two of the markets we track experienced an improvement in affordability over the same period.”
“However, the prisoner’s dilemma that prevents existing homeowners from selling will continue to drive up unadjusted house prices and reduce affordability,” he said.
See the original article here: https://www.housingwire.com/articles/40527-good-news-for-buyers-affordability-reversed-course-increased-in-april