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House Prices Continue to Rise, but House-Buying Power Still near Historic Highs

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 April 2018 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.

Chief Economist Analysis: House Prices, When Adjusted for Consumer Buying Power, Aren’t Even Close to Their Historic Peak

“The Real House Price Index (RHPI) views house prices in relation to consumer house-buying power, incorporating household income, mortgage rates and an unadjusted house price index,” said Mark Fleming, chief economist at First American. “When incomes rise, consumer house-buying power increases. When mortgage rates or house prices rise, consumer house-buying power declines.

“In April 2018, increases in all three of these areas drove an 8.8 percent increase in the Real House Price Index from its year-earlier level, marking a significant decline in affordability. Mortgage rates rose by 6.6 percent, while the unadjusted house price index increased by 10.4 percent. Household income, which contributes positively to housing affordability, however, increased 2.9 percent compared with a year ago in April.

“It is not surprising that unadjusted house prices have increased so much,” said Fleming. “Demand for residential real estate, along with a nationwide shortage of supply, has led to a historically tight inventory of homes for sale, which leads to quickly rising house prices. However, trends show that the increase in consumer house-buying power has outpaced the rise in unadjusted house prices.

“When house prices are adjusted for consumer house-buying power, the real level of house prices becomes more apparent. Real consumer house-buying power adjusted house prices today are 32.1 percent below their peak in July 2006, and 8.9 percent below their level in the year 2000.

“Unadjusted house prices are 9.2 percent above the housing boom peak in 2007, and have been on the rise since the end of 2011, nearly a seven-year run,” said Fleming. “But consumer house-buying power has increased by more than five times as much – 51 percent – since the housing boom peak in 2007 and is up 16 percent since the end of 2011.

“House-buying power, how much one can buy based on changes in income and interest rates, has benefited in recent years from a decline in mortgage rates and the more recent slow, but steady, growth of household income. Between the peak of unadjusted house prices in 2007 and this April, the 30-year, fixed-rate mortgage has fallen from 6.29 percent to 4.47 percent. Over the same period, household income has increased 23.7 percent. Lower mortgage rates and higher income levels mean consumers have significantly higher house-buying power today than they did in 2007.”

April 2018 Real House Price State Highlights

  • The five states with the greatest year-over-year increase in the RHPI are: Nevada (+15.4 percent), New Hampshire (+14.4 percent), Delaware (+13.9 percent), New York (+13.8 percent) and Massachusetts (+12.8 percent).
  • No state had a year-over-year decrease in the RHPI in April.

April 2018 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: San Jose, Calif. (+23.9 percent), Las Vegas (+18.2 percent), Jacksonville, Fla. (+14.3 percent), Charlotte, N.C. (+14.1 percent) and Seattle (+13.9 percent).
  • No CBSA had a year-over-year decrease in the RHPI in April.

Next Release

The next release of the First American Real House Price Index will take place the week of July 16, 2018 for May 2018 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. © 2018 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; and banking, trust and wealth management services. With total revenue of $5.8 billion in 2017, the company offers its products and services directly and through its agents throughout the United States and abroad. In 2018, First American was named to the Fortune 100 Best Companies to Work For® list for the third consecutive year. More information about the company can be found at

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