Real house prices decreased 1.2% month-over-month in November, according to the First American Real House Price Index (RHPI).
The RHPI increased by 60% on an annual basis. Two factors drove the rapid decline in affordability, according to First American Financial Corp. Chief Economist Mark Fleming. The first was a 7.6% annual increase in nominal house prices. The second, a 3.7% increase in the average 30-year, fixed mortgage rate compared with one year ago.
“Real estate dynamics are local, yet nearly every market in the country during the pandemic was characterized as a seller’s market. Wherever you turned, multiple-offer bidding wars were the rule, not the exception,” said Fleming. “However, as house prices adjust to the reality of higher mortgage rates, the pace of adjustment will vary significantly by market.”
Nominal house prices declined from their recent peaks in 37 of the top 50 markets the index tracks.
The market with the biggest decline was San Francisco. Nominal house prices peaked in the City by the Bay in April 2022. They have since dropped almost 10% as the housing market rebalances.
San Jose, Calif. follows. Nominal house prices there have declined 7.8% from the recent peak in March 2022. Along with Phoenix, these more “overvalued” markets are correcting faster.
But house prices have only recently hit their peaks, said Fleming said. They have yet to decline in markets such as Louisville, Ky., Kansas City, Mo., Hartford, Conn., and several others.
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