Rising home prices in the United States have been mitigated by lower mortgage rates in most markets but there are a few exceptions.
According to a new analysis from First American, there are four markets where the median home price is still too high for many buyers even though homebuying power has increased.
Perhaps unsurprisingly, the four markets are all coastal cities in California: San Jose, San Francisco, Los Angeles, and San Diego.
“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 Mark Fleming, chief economist at First American. “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.”
First American’s Real House Price Index 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.
Overall, Real house prices in December 2019 increased 1.4% month-over-month while they declined 5.8% year-over-year.
Homebuying power – how much buyers can buy based on changes in income and interest rates - decreased 0.2% month-over-month and increased 14% year-over-year.
“As 2019 came to a close, potential home buyers received a year-end gift as affordability improved relative to one year ago,” said Fleming. “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.”
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