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Regional Variances in Household Income Influence Affordability, According to First American Real House Price Index

—While low mortgage rates and higher income boost affordability and demand for homes, it’s hard to buy what’s not for sale, says Chief Economist Mark Fleming—

SANTA ANA, Calif.–(BUSINESS WIRE)–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 December 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.

December 2019 Real House Price Index

  • Real house prices increased 1.4 percent between November 2019 and December 2019.
  • Real house prices declined 5.8 percent between December 2018 and December 2019.
  • Consumer house-buying power, how much one can buy based on changes in income and interest rates, decreased 0.2 percent between November 2019 and December 2019, and increased 14.0 percent year over year.
  • Median household income has increased 2.2 percent since December 2018 and 58.5 percent since January 2000.
  • Real house prices are 17.3 percent less expensive than in January 2000.
  • While unadjusted house prices are now 9.3 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: Household Income, Mortgage Rates Boost Affordability in December

“As 2019 came to a close, potential home buyers received a year-end gift as affordability improved relative to one year ago,” said Mark Fleming, chief economist at First American. “Two of the three key drivers of the Real House Price Index (RHPI), household income and mortgage rates, swung in favor of increased affordability in December.

“The Bureau of Labor Statistics reported that average hourly earnings increased in December 2019 by 3.2 percent compared with a year ago. Wage growth results in higher household income, which means home buyers can borrow more,” said Fleming. “Compared with December 2018, household income increased by 2.2 percent, and the 30-year, fixed-rate mortgage fell by 0.9 percentage points. So, consumer house-buying power – how much one can buy based on changes in income and interest rates – continued to grow in December, which helps encourage demand.”

Regional Household Income Differences Shape Housing Affordability

“Declining mortgage rates increase affordability equally in each market, as mortgage rates are generally similar across the country,” said Fleming. “However, household income varies substantially by housing market, so comparing house-buying power with median sales price by market can provide perspective on housing affordability.

“In the figure here, home buyers in markets below the line benefit from house-buying power that is greater than the median house price in their market – houses are relatively more affordable in these markets,” said Fleming. “Home buyers in markets above the line are less fortunate, as house-buying power is less than the median house price in these markets – houses are relatively less affordable in these markets.

“Surprisingly, median house prices exceed house-buying power in only four markets, and they’re all coastal cities in California. Of the 44 markets we track, these four markets also have the highest nominal home prices. Yet, other housing markets also considered expensive, like Seattle, Washington, D.C., Boston and Denver, are more affordable than many believe,” said Fleming. “The list below shows the top 10 most expensive markets, measured by median sale price of a home in December 2019. Examining the list, it’s clear that the strength of median incomes in these markets helps boost house-buying power above the median house price, helping affordability.”



House-Buying Power


Median Sale Price (3-month moving average)


Median Income

San Jose, CA







San Francisco, CA







Los Angeles, CA







San Diego, CA







Seattle, WA







Boston, MA







New York, NY







Denver, CO







Sacramento, CA







Washington, DC







Sellers’ Market Conditions, Faster Price Appreciation Ahead

“House-buying power exceeds median house price in most of the markets we monitor in our RHPI. However, while low mortgage rates and higher income boost affordability and demand for homes, it’s hard to buy what’s not for sale,” said Fleming. “That means sellers’ market conditions are likely to persist in 2020, as short supply and strong demand will drive faster price appreciation and reduce the current levels of affordability in many markets. The question is, can house-buying power growth can keep up.”

December 2019 Real House Price State Highlights

  • There are no states with a year-over-year increase in the RHPI.
  • The five states with the greatest year-over-year decrease in the RHPI are: New Mexico (-9.9 percent), Utah (-9.1 percent), North Dakota (-9.0 percent), Nebraska (-8.7 percent), and California (-8.6 percent).

December 2019 Real House Price Local Market Highlights

  • Among the Core Based Statistical Areas (CBSAs) tracked by First American, the only market with a year-over-year increase in the RHPI is: Cleveland (+0.5 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. (-11.2 percent), Baltimore (-10.5 percent), Riverside, Calif. (-10.2 percent), San Francisco (-9.3 percent), and Portland, Ore. (-9.2 percent).

Next Release

The next release of the First American Real House Price Index will take place the week of March 30, 2020 for January 2020 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. © 2020 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 $6.2 billion in 2019, the company offers its products and services directly and through its agents throughout the United States and abroad. In 2020, First American was named to the Fortune 100 Best Companies to Work For® list for the fifth consecutive year. More information about the company can be found at


Media Contact:

Marcus Ginnaty

Corporate Communications

First American Financial Corporation

(714) 250-3298

Investor Contact:
Craig Barberio

Investor Relations

First American Financial Corporation

(714) 250-5214


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