In September, home prices rose 0.9%, declining 7.6% year over year, First American said in its Real House Price Index. According to the company, unadjusted house prices sit 8.1% above the housing boom peak.

Consumer buying power,
which measures the influence of income and interest rate changes on house-hold
spending, increased by 0.2% between August and September, rising 15.8% year
over year.

When consumer house-buying
power is factored in, home prices are actually 42.2% below their 2006 peak and
18.8% below prices from January 2000.

Although housing affordability improved during the month,
Mark Fleming, First American’s chief economist said the growth just wasn’t
enough.

“Two of the three key drivers of the Real House Price Index, household income and mortgage rates, modestly swung in favor of increased affordability in September, yet affordability declined month over month,” Fleming said.

This is
because September’s home price growth outpaced improvements in overall affordability,
according to Fleming.

“The 30-year,
fixed-rate mortgage fell by 0.01 percentage points and household income
increased 0.03 % compared with August 2019,” Fleming said. “When household
income rises, consumer house-buying power increases. Declining mortgage rates
have a similar impact on consumer house-buying power.”

“However, nominal house price appreciation jumped 1.1% in September, outpacing the benefits of rising house-buying power on affordability,” Fleming said. “Accordingly, the RHPI increased 0.9% month over month.”

Increases in the RHPI
indicate a decline in affordability, and September ‘s was the largest
month-over-month affordability decline since November 2018, Fleming said.

While declining
mortgage rates have increased house-buying power throughout the year, Fleming said
it has also led to a  greater demand of
supply, which has put pressure on the nation’s home prices.

“When demand increases for a scarce (limited or low supply) good, prices will rise faster,” Fleming said. “While year-over-year, the RHPI shows an improvement in affordability, the increase in house-buying power in September was not enough to offset nominal house price gains compared with August.”

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