Cooling home price growth in October helped boost affordability to its best level since the summer of 2022, according to the latest First American Data & Analytics Real House Price Index.
“Housing affordability improved year over year for the eighth consecutive month in October,” says Mark Fleming, chief economist for First American, in a statement. “While that’s a welcome milestone, affordability remains more than 64 percent below the pre-pandemic five-year average – but the trend is durably heading in the right direction.”
“The one-two punch that did the most damage to affordability after the pandemic – rapid house price appreciation followed by a sharp run-up in mortgage rates – has lost its force,” Fleming says. “Price growth has cooled, mortgage rates have eased from their peak, and incomes have continued to climb higher.”
In addition, there was more available inventory in October, supporting affordability.
“There’s an important metric that is quietly signaling the pace of house price growth right now– months’ supply, which measures the time it would take to deplete the inventory of homes for sale at the current sales rate,” Fleming says. “Months’ supply helps identify whether a market favors buyers or sellers. Generally, when months’ supply is low, competition tends to run hotter and price growth is more likely to accelerate. When months’ supply rises, the market’s ‘price thermostat’ turns down, and price appreciation typically cools – supporting affordability.”
Throughout most of the U.S., where supply is the greatest, prices are decreasing.
“In places like Austin, Texas and San Antonio, months’ supply is among the highest on the chart and price growth is weak,” Fleming says. “A similar story shows up in parts of Florida. Metropolitan areas, such as Miami, Tampa, Fla. and Orlando, Fla., also have more supply and cooler, or negative, price appreciation, which helps boost affordability relative to markets where months’ supply is low and prices are still rising faster.”
“When the local market offers buyers more options relative to the pace of purchases, the temperature of price appreciation tends to drop,” he says. “At the other end of the affordability spectrum are markets where months’ supply remains relatively low and price growth is stronger. Cincinnati, Chicago, and Cleveland stand out for hotter price appreciation with less months’ supply.”
Photo: Blake Wheeler