Adjusted Home Prices Decreased 2.6% in August: First American

Home prices, when adjusted for income and interest rates, decreased in August by 2.6% on a year-over-year basis, according to First American Financial Corp.

When compared with July, "real house prices" as First American terms this, increased in August by less than 1%.

Real house prices are 41% below their peak in July 2006.

"Contrary to popular opinion, housing isn't getting more expensive. In fact, on a purchasing-power adjusted basis, housing is becoming more affordable," said First American chief economist Mark Fleming.

The growth in consumer house-buying power is outpacing the increase in actual home prices driven by tight inventories, he said.

Michigan had the largest increase in First American's Real House Price Index compared with August 2015, up 5.9%, while Iowa had the largest decrease, down 5.9%. A decline in the RHPI means housing is more affordable.

Jacksonville, Fla., was the city with the largest increase, at 8.1%, while Virginia Beach, Va., had a 5.5% decrease.

"At the moment, affordability is actually increasing in more markets than it is decreasing, including San Francisco (where the RHPI is down 4.6% year over year), San Jose (down 3.1%), New York (down 2.7%), Washington (down 2.8%) and Boston (down 2.4%). The conventional wisdom that these markets are overvalued does not account for the meaningful growth in consumer house-buying power across the majority of major metropolitan markets," said Fleming.