Affordability Falls to its Lowest Level Since 2008, According to First American Real House Price Index

The challenge for home buyers in 2022 will mirror 2020 and 2021 – you can’t buy what’s not for sale, even if you can afford to, says Chief Economist Mark Fleming.

 SANTA ANA, Calif., Dec. 27, 2021 – First American Financial Corporation (NYSE: FAF), a leading global provider of title insurance, settlement services and risk solutions for real estate transactions, today released the October 2021 First American Real House Price Index (RHPI). The RHPI measures the price changes of single-family properties throughout the U.S. adjusted for the impact of income and interest rate changes on consumer house-buying power over time at national, state and metropolitan area levels. Because the RHPI adjusts for house-buying power, it also serves as a measure of housing affordability.

Chief Economist Analysis: Real House Prices Increased 19.6 Percent Year Over Year

            “Affordability sank to its lowest level since 2008 in October, as two of the three key drivers of the Real House Price Index (RHPI) swung in favor of reduced affordability relative to one year ago. Higher mortgage rates and record year-over-year nominal house price growth triggered a nearly 20 percent jump in the RHPI (rising RHPI values indicate declining affordability),” said Mark Fleming, chief economist at First American. “The soaring nominal house prices and uptick in mortgage rates swamped any affordability gains from the 3.6 percent yearly increase in household income. Since we know real estate is local, house-buying power and nominal house price gains vary by city, begging the question, where is affordability declining the most?”

The Five Cities Where Affordability Declined the Most

“Affordability declined year over year in all of the markets we track,” said Fleming. “The five markets with the greatest year-over-year decline in affordability were:

1.) Phoenix (+33.7 percent),

2.) Charlotte, N.C. (+32.3 percent),

3.) Tampa, Fla. (+30.9 percent),

4.) Jacksonville, Fla. (+29.3 percent),

5.) Memphis, Tenn. (+27.5 percent).

“In October, mortgage rates increased 0.2 percentage points relative to one year ago, which reduces affordability, all else held equal. Higher mortgage rates decrease affordability equally in each market as mortgage rates are generally similar across the country,” said Fleming. “However, household income growth and nominal house prices vary by market, creating the market-level variance in affordability. Faster nominal house price appreciation can erode, or even eliminate, the boost in affordability from higher household income.

“Phoenix suffered the greatest year-over-year loss in affordability in October, mostly due to the nearly 34 percent annual increase in nominal house price growth. Robust investor activity and strong net-in migration to Phoenix has fueled soaring demand for homes against a limited supply of homes for sale,” said Fleming. “In Charlotte, N.C., household income declined modestly, meaning all three key drivers of the RHPI dragged affordability down in October relative to one year ago. The importance of household income becomes apparent when comparing the decline in affordability in Charlotte to Tampa. While annual nominal house price appreciation in Tampa outpaced that of Charlotte, rising household income tempered the decline in affordability. Ultimately, nominal house price appreciation overwhelmed any affordability lift from house-buying power in all three of these markets.”

How Will Affordability Impact the Housing Market in 2022?

            “If affordability falls too far, some home buyers on the margin will pull back, prompting fewer bidding wars and causing house prices to moderate. In the near term, a labor market characterized by high demand, but limited supply means upward pressure on wages as employers compete to attract employees. While mortgage rates are expected to increase in 2022 as the economic recovery continues, consensus expectations still put them below 4 percent,” said Fleming. “For some home buyers, as the ‘big short’ in housing supply continues, it will become impossible to keep up with double-digit nominal house price growth, especially in a rising-rate environment. The challenge for home buyers in 2022 will mirror 2020 and 2021 – you can’t buy what’s not for sale even if you can afford to.”

October 2021 Real House Price Index Highlights

  • Real house prices increased 3.7 percent between September 2021 and October 2021.
  • Real house prices increased 19.6 percent between October 2020 and October 2021.
  • Consumer house-buying power, how much one can buy based on changes in income and interest rates, decreased 1.7 percent between September 2021 and October 2021, and increased 0.6 percent year over year.
  • Median household income has increased 3.6 percent since October 2020 and 66.9 percent since January 2000.
  • Real house prices are 7.0 percent less expensive than in January 2000.
  • While unadjusted house prices are now 39.7 percent above the housing boom peak in 2006, real, house-buying power-adjusted house prices remain 34.7 percent below their 2006 housing boom peak.

October 2021 Real House Price State Highlights

  • The five states with the greatest year-over-year increase in the RHPI are: Arizona (+32.7 percent), Florida (+25.9), South Carolina (+25.9 percent), Georgia (+24.8 percent), and Nevada (+23.7),
  • There were no states with a year-over-year decrease in the RHPI.

 October 2021 Real House Price Local Market Highlights

  • Among the Core Based Statistical Areas (CBSAs) tracked by First American, the five markets with the greatest year-over-year increase in the RHPI are: Phoenix (+33.7 percent), Charlotte, N.C. (+32. 3), Tampa, Fla. (+30.9 percent), Jacksonville, Fla. (+29.3 percent), and Memphis, Tenn. (+27.5 percent).
  • Among the Core Based Statistical Areas (CBSAs) tracked by First American, there were no markets with a year-over-year decrease in the RHPI. 

Next Release

            The next release of the First American Real House Price Index will take place the week of January 24, 2022 for November 2021 data.



            The methodology statement for the First American Real House Price Index is available at


            Opinions, estimates, forecasts and other views contained in this page are those of First American’s Chief Economist, do not necessarily represent the views of First American or its management, should not be construed as indicating First American’s business prospects or expected results, and are subject to change without notice. Although the First American Economics team attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. © 2021 by First American. Information from this page may be used with proper attribution.

 About First American

            First American Financial Corporation (NYSE: FAF) is a leading provider of title insurance, settlement services and risk solutions for real estate transactions that traces its heritage back to 1889. First American also provides title plant management services; title and other real property records and images; valuation products and services; home warranty products; banking, trust and wealth management services; and other related products and services. With total revenue of $7.1 billion in 2020, the company offers its products and services directly and through its agents throughout the United States and abroad. In 2021, First American was named to the Fortune 100 Best Companies to Work For® list for the sixth consecutive year. More information about the company can be found at