Purchasing power rose 15.8% annually in July and 2.2% monthly, behind wage increases and falling interest rates, according to First American's Real House Price Index. In comparison, purchasing power rose by 13.7% in June compared with the previous year and by 1.1% in June compared with the previous month.
The Real House Price Index – a metric that adjusts residential property prices for fluctuations in income and mortgage rates – fell 6.6% annually and fell 0.8% from June. A decrease in the RHPI means improved affordability for buyers. Despite the pandemic, median household income rose 5.5% year over year and was the main driver behind greater affordability.
"With the exception of the 2008-2009 Great Recession and a slight decline in the 1990 recession, nominal house prices have been flat or have increased slowly but not decreased," said Mark Fleming, chief economist at First American.
"This shows the 'downward stickiness' of house prices during the economic decline. In the pandemic-triggered recession of 2020, the appreciation of house prices grew faster than in any of the economic declines in our recent past. This phenomenon of persistent Property Price The price increase in the face of economic decline is unique in the property market as sellers tend to pull out of offer to await the economic storm rather than sell at lower prices. "
At the state level, only Wyoming recorded annual RHPI growth of 1.53% in July. This was followed by declines of 0.61% in Oklahoma and 0.86% in Ohio. The RHPI fell the furthest in Massachusetts, declining 11.37% from July 2019. New Hampshire and Nevada followed with decreases of 10.97% and 10.54%, respectively.
In terms of real estate market, the RHPI rose in only seven of the 50 largest conurbations recorded. Pittsburgh's 4.21% gain was landmark, followed by 2.19% in Cleveland and 1.65% in Seattle. Boston posted the largest decline at 13.83%, while San Francisco was close behind with a 13.5% decline, followed by a 12.16% decline in San Jose, California.
"The nominal appreciation in house prices shows no signs of slowing as the imbalance between supply and demand persists," Fleming said in the report. "While mortgage rates have won the affordability tug-of-war at the national level, some real estate markets are beginning to feel the impact of pandemic job losses on household income levels. Affordability is robust in the face of the economic downturn, but how resilient it is depends on the dynamics of mortgage rates , income and the appreciation of real estate prices. "