Something in these 6 cities is leading a housing market shift

But how are they bucking the national trend?

Something in these 6 cities is leading a housing market shift

While most of the US housing market continues to favor sellers, 6 cities are leading a shift towards a buyers’ market.

That’s according to First American Financial Corporation’s chief economist Mark Fleming, who says these cities are currently the outliers in a market where affordability remains constrained.

“Throughout 2018, consistent growth among three driving forces – mortgage rates, household income, and unadjusted house prices – defined the housing market. These three factors are also the core metrics that comprise the Real House Price Index (RHPI),” said Mark Fleming, chief economist at First American. “November 2018 was no exception, as household income, mortgage rates, and the unadjusted house price index all increased compared with a year ago.

First American’s Real House Price Index; which tracks prices based on single-family house prices and adjusted for the impact of income and interest rate changes; shows that nationally, consumer home-buying power was reduced in November 2018 by 0.04% month-over-month and by 7.5% year-over-year.

“Six cities are leading the shift in the housing market. Consider that in October 2018, real house prices increased month over month in all 44 of the markets we track in the RHPI,” said Fleming. “Real house prices declined in six cities, signaling an improvement in affordability.”

The outliers
The six markets with a month-over-month decline in the RHPI were:

  1. San Jose, CA (- 0.7 percent)
  2. Boston, MA (- 0.4 percent)
  3. Portland, OR (- 0.2 percent)
  4. Pittsburgh, PA (- 0.2 percent)
  5. San Diego, CA (- 0.1 percent)
  6. Seattle, WA (- 0.1 percent)

“Rising inventory is one reason these markets are bucking the national trend,” explained Fleming. “As more inventory enters the market, buyers have more options, bidding wars are less likely and sellers start reducing list prices.”

But are these 6 outliers indicative of a wider shift? Fleming says there are some signs that that is true including a slowing of monthly real house price appreciation in the other 38 markets tracked.

“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 home buyers,” said Fleming. “Based on what we already know about mortgage rates in December, we expect affordability will increase in even more markets in next month’s (December) RHPI, as increasing inventory, rising income, and the December decline in mortgage rates are likely to drive further decreases in the RHPI.”