The power in today’s housing market is in the hands of the seller, according to the April 2021 First American Real House Price Index (RHPI). In April, First American Data & Analytics’ nominal house price index increased 16.2% year over year, the fastest pace since 2005.

“Rapid appreciation is driving declines in affordability, despite rising incomes and lower mortgage rates,” said Mark Fleming, chief economist at First American. “Nationally, according to our Real House Price Index, housing affordability declined in April on a year-over-year basis by 7.0%, the most since December 2018.

Despite this, Fleming suggested that if prices continue to rise, this may not be a bad time to buy. “Wait for the housing market to cool down, or jump in before affordability declines further? That is the question potential home buyers are trying to answer,” said Fleming. “Will affordability decline in the months to come? If so, it may be a good time to buy before things get worse.”

Fleming pointed out that while inventory has ticked up slightly in recent weeks, it remains near historic lows and is not enough to compensate for a decade of underbuilding and homeowners simply staying put.

“It will take years for supply to catch up to demand and, in the meantime, any new housing inventory will be very quickly absorbed by the existing demand. So, significant housing supply relief is unlikely in the near term,” Fleming said.

Consumer house-buying power, how much one can buy based on changes in income and interest rates, increased 1.4% between March 2021 and April 2021, and increased 8.6% year over year, according to the report. In addition, median household income increased 5.3% since April 2020 and 78.7% since January 2000.

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