Income gains and lower mortgage rates contributed to an uptick in affordability in July across most major markets in the country, First American Financial Corp. said Monday.
First American's Real House Price Index, which measures the change in the price of single-family homes against the impact of income and interest rate changes that affect consumers' buying power, fell 2.1% from June and 4.8% year-over-year. Declines occurred across 37 of 43 metropolitan areas analyzed by First American.
"Rising household incomes and low mortgage rates continue to foster meaningful growth in consumer house-buying power across of the majority of major metropolitan markets in July , which were sufficient to more than offset unadjusted price appreciation," First American chief economist Mark Fleming said in a news release.
"A rise in estimated median household incomes is also playing a large role in certain key markets that otherwise seem expensive when just considering nominal house prices, and not factoring in the boost in buying power provided by increased income levels in those markets."
The cities with the largest declines in so-called real home prices, which signifies an increase in affordability, were Virginia Beach, Va., Washington, D.C., Cleveland, Oklahoma City and San Francisco. All of these cities experienced real house price declines of 6% or more, with Washington and San Francisco in particular seeing the benefit of higher income growth.
