Consumer House-Buying Power May Reach Record in 2019

SANTA ANA, Calif.–First American Financial Corporation (NYSE: FAF), a leading global provider of title insurance, settlement services and risk solutions for real estate transactions, today released the May 2019 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.Because the RHPI adjusts for house-buying power, it also serves as a measure of housing affordability.

May 2019 Real House Price Index

  • Real house prices decreased 0.7 percent between April 2019 and May 2019.
  • Real house prices declined 3.7 percent between May 2018 and May 2019.
  • Consumer house-buying power, how much one can buy based on changes in income and interest rates, increased 1.3 percent between April 2019 and May 2019, and increased 9.3 percent year over year.
  • Average household income has increased 2.8 percent since May 2018 and 56.4 percent since January 2000.
  • Real house prices are 17.0 percent less expensive than in January 2000.
  • While unadjusted house prices are now 3.2 percent above the housing boom peak in 2006, real, house-buying power-adjusted house prices remain 41.1 percent below their 2006 housing boom peak.

Chief Economist Analysis: Mortgage Rates Below Four Percent Likely in 2019

“Later this week, the Federal Open Market Committee (FOMC) will convene and likely announce a rate cut, according to experts. The first Fed rate cut since December 2008 will trigger industry and media speculation about mortgage rates declining further,” said Mark Fleming, chief economist at First American. “While changes to the federal funds rate don’t directly influence mortgage rates, a rate cut will indicate concern about possible economic weakness and that may increase demand for long-term Treasury bonds, which mortgage rates follow closely.

“The consensus among economists is that the 30-year, fixed-rate mortgage will decline from its first quarter 2019 rate of 4.4 percent to an average of 3.9 percent in 2019,” said Fleming. “Additionally, the expectation of lower rates comes during the longest economic boom in history and a continued healthy labor market, prompting the question: what do low mortgage rates and a still booming economy mean for housing?”

Mortgage Rates and Income Growth Boosting Consumer House-Buying Power

Fannie Mae forecasts that the 30-year, fixed-rate mortgage will fall from its July 2019 rate of 3.8 percent to 3.7 percent for the remainder of the year, boosting affordability for home buyers,” said Fleming. “The First American Real House Price Index (RHPI) adjusts home prices based on changes to consumer house-buying power, how much one can buy based on household income and the 30-year, fixed-rate mortgage. Shifts in income and interest rates either increase or decrease consumer house-buying power or affordability. When incomes rise and/or mortgage rates fall, consumer house-buying power increases.

“If the mortgage rate declines from its current July 2019 level of 3.8 percent to the expected level of 3.7 percent in the third quarter of 2019, assuming a 5 percent down payment, and the July 2019 average household income of $65,800, house-buying power increases a modest 0.1 percent, from $410,000 to $414,000,” said Fleming. “In this hypothetical 3.7 percent mortgage rate environment, consumer-house buying power would be 13.3 percent higher than it was in July 2018, when the 30-year, fixed mortgage rate was 4.5 percent. In fact, it would be the highest house-buying power in the history of the series, which dates to the year 2000.

“It’s no secret that declining mortgage rates increase affordability. However, mortgage rates have been below 3.7 percent before. Indeed, in 2012, the 30-year, fixed-rate mortgage hit a low of 3.3 percent,” said Fleming. “Yet, house-buying power was lower than it is today. The reason? The other half of the house-buying power equation: income.

“Our estimate of average household income, based on Census and Bureau of Labor Statistics data, is at the highest level since 2000. Average nominal household incomes are nearly 57 percent higher today than in January 2000,” said Fleming. “Record income levels combined with mortgage rates near historic lows mean consumer house-buying power is more than 150 percent greater today than it was in January 2000. While rates are expected to remain low, the fate of the labor market will determine the direction of the other half of the house-buying power equation and, ultimately, affordability.”

May Real House Price State Highlights

  • The four states with the greatest year-over-year increase in the RHPI are: Wisconsin (+1.5 percent), Maryland (+0.2 percent), New Hampshire (+0.2 percent), and Rhode Island (+0.1 percent).
  • The five states with the greatest year-over-year decrease in the RHPI are: North Dakota (-8.5 percent), Wyoming (-8.0 percent), California (-7.1 percent), Arkansas (-5.8 percent), and New Mexico (-5.7 percent).

May 2019 Real House Price Local Market Highlights

  • Among the Core Based Statistical Areas (CBSAs) tracked by First American, the five markets with the greatest year-over-year increase in the RHPI are: Providence, R.I. (+2.2 percent), Milwaukee (+1.1 percent), Columbus, Ohio (+0.7 percent), Detroit (+0.7 percent), and Las Vegas (+0.1 percent).
  • Among the Core Based Statistical Areas (CBSAs) tracked by First American, the five markets with the greatest year-over-year decrease in the RHPI are: San Jose, Calif. (-13.9 percent), Seattle (-9.4 percent), San Francisco (-7.8 percent), Portland, Ore. (-7.7 percent), and Riverside, Calif. (-7.0 percent).

Next Release

The next release of the First American Real House Price Index will take place the week of August 26, 2019 for June 2019 data.



The methodology statement for the First American Real House Price Index is available at


Opinions, estimates, forecasts and other views contained in this page are those of First American’s Chief Economist, do not necessarily represent the views of First American or its management, should not be construed as indicating First American’s business prospects or expected results, and are subject to change without notice. Although the First American Economics team attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. © 2019 by First American. Information from this page may be used with proper attribution.

About First American

First American Financial Corporation (NYSE: FAF) is a leading provider of title insurance, settlement services and risk solutions for real estate transactions that traces its heritage back to 1889. First American also provides title plant management services; title and other real property records and images; valuation products and services; home warranty products; property and casualty insurance; banking, trust and wealth management services; and other related products and services. With total revenue of $5.7 billion in 2018, the company offers its products and services directly and through its agents throughout the United States and abroad. In 2019, First American was named to the Fortune 100 Best Companies to Work For® list for the fourth consecutive year. More information about the company can be found at

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