Affordability
in
the
housing
market
is
as
bad
as
it’s
been
in
more
than
three
decades
—
and
relief
isn’t
coming
this
year.

That’s
the
conclusion
of


First
American’s
Real
House
Price
Index
(RHPI)
report
for
May,
which
shows
a
9%
year-over-year
decline
in
affordability.
The
increase
in
the
RHPI
was
driven
by
5.9%
growth
in
nominal
home
prices
and
a
jump
of
0.6%
in
the
30-year
fixed

mortgage
rate
compared
to
a
year
ago.

The
RHPI
measures
affordability
by
adjusting
nominal
home
prices
“for
purchasing
power
by
considering
how
income
levels
and
mortgage
rates
influence
the
amount
home
buyers
can
borrow,“
the
company
explained.

“At
the
beginning
of
the
year,
we
predicted
affordability
may
end
2024
modestly
higher
than
at
the
end
of
2023,”
First
American
chief
economist
Mark
Fleming
said
in
the
report.
“Unfortunately,
inflation
has
proven
stubborn
and
led
to
the


Federal
Reserve’s
‘higher-for-longer’
stance
on
interest
rates,
contributing
to
an
elevated
outlook
for
mortgage
rates,
while
house
prices
have
once
again
demonstrated
their
‘downside
stickiness.’”

While
Fleming
doesn’t
see
a
meaningful
improvement
in
affordability
for
the
rest
of
the
year,
he
does
see
it
coming
in
2025
if
mortgage
rates
come
down
as
the
Federal
Reserve
has

signaled.
Other
positive
signs
that
could
improve
affordability
are
that
hourly
wage
growth
has
increased
by
4.1%
year
over
year,
job
growth
has
been
steady
and
unemployment
is
low.

Still,
if
the
current
levels
of
income
growth,
nominal
price
growth
and
mortgage
rates
hold
steady
through
the
rest
of
2024,
then
affordability
will
be
45%
worse
than
February
2022,
when
interest
rates
began
to
rise,
First
American
reported.

“While
affordability
is
likely
to
remain
constrained
for
the
remainder
of
2024,
mortgage
rates
are
expected
to
come
down
in
2025,
which
would
be
welcome
news
for
potential
home
buyers,”
Fleming
said
in
the
report.

Geographically,
traditionally
affordable

West
Virginia
posted
the
highest
year-over-year
gain
in
the
RHPI
at
a
whopping
23.2%,
followed
by

Illinois
(16%),

Rhode
Island
(15.6%),

Vermont
(15.3%)
and

New
Jersey
(15.1%).

Memphis,
Tennessee,
led
the
way
among
the
metros
tracked
by
First
American
with
an
18%
increase
in
the
RHPI
compared
to
May
2023.
It
was
followed
by
Cincinnati
(17.8%);
Providence,
Rhode
Island
(16.4%);

Seattle
(16.1%);
and

Boston
(15.5%).

First
American’s
report
mirrors
the
May
report
from


CoreLogic
released
this
week.
That
report
showed
a
4.9%
year-over-year
increase
in
home
prices
and
a
gain
of
0.6%
relative
to
April.
One
meaningful
deviation
is
that
CoreLogic
had
New
Hampshire
with
the
highest
home-price
growth
during
the
past
year
at
12%.

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