Property values have continued rising across the country, but six cities bucking the national trend are leading a shift in the housing market, which could lessen affordability hurdles for homebuyers, according to First American Financial Corp.’s Real House Price Index.
“Real” house prices increased 15.3% year-over-year in November, according to a First American analysis of home values, factoring in local wages and mortgage rates in large cities. But while in the previous month all 44 analyzed metropolitan areas saw real home prices increase, a group of cities seeing declines emerged in November, showing signs of a shifting market.
Negative price appreciation reported by San Jose, Calif., Boston, Portland, Ore., Pittsburgh, San Diego and Seattle between October and November can in part be attributed to growth in home supply, which has been particularly tight in recent years and largely responsible for spikes in property values.
Five of the six cities that saw real house prices fall in November experienced annual increases in the number of active listings, according to Realtor.com.
“Not only did affordability increase in these six markets, but monthly real house price appreciation slowed in the other 38 markets we track. Recent inventory increases and the slowdown in house price appreciation are not coincidences and may be the first signs of a weakening sellers’ market, which is good news for homebuyers,” Mark Fleming, First American’s chief economist, said in a press release.
“Based on what we already know about mortgage rates in December, we expect affordability will increase in even more markets in next month’s RHPI, as increasing inventory, rising income, and the December decline in mortgage rates are likely to drive further decreases in the RHPI,” he added.
In addition to increases in inventory, wage and job growth could also increase consumer confidence in the housing market.