First American: Six Markets Lead Shift Away from Sellers’ Market

First American Financial Corp., Santa Ana, Calif., said “real” home prices declined in six major U.S. markets, the result of strong jumps in active listings.

The company’s monthly Real House Price Index showed real house prices increased by 0.8 percent between October and November. Real house prices increased by 15.3 percent year over year.

The report noted consumer house-buying power decreased 0.04 percent between October and November and declined by 7.5 percent year over year. Real house prices are 9.0 percent less expensive than in January 2000. While unadjusted house prices are now 1.8 percent above the housing boom peak in 2006, real, house-buying power-adjusted house prices remain 35.3 percent below their 2006 housing boom peak.

The report said six cities are leading the shift in the housing market. While in October, real house prices increased month over month in all 44 of the markets tracked, in Novemberreal house prices declined in six cities, which First American Chief Economist Mark Fleming said signaled an improvement in affordability. Those six markets were:

–San Jose, Calif. (- 0.7 percent)
–Boston (- 0.4 percent)
–Portland, Ore. (- 0.2 percent)
–Pittsburgh, Pa. (- 0.2 percent)
–San Diego (- 0.1 percent)
–Seattle (- 0.1 percent)

“Rising inventory is one reason these markets are bucking the national trend,” Fleming said. “Active listings increased year over year in five of the six markets listed. In San Jose, Seattle, and San Diego, the increase in active listings was substantial, as active listings jumped 158 percent, 77 percent, and 46 percent, respectively. As more inventory enters the market, buyers have more options, bidding wars are less likely and sellers start reducing list prices.”

Fleming said these six outliers could signal a broader shift in the housing market. “Not only did affordability increase in these six markets, but monthly real house price appreciation slowed in the other 38 markets we track,” he said. “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. 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.”

First American reported states with the greatest year-over-year increase real home prices were Ohio (22.4 percent), Nevada (21.3 percent), Georgia (20.0 percent), New Hampshire (19.6 percent) and Mississippi (19.4 percent). No state had a year-over-year decrease in the index in November.

Among metros tracked by First American, markets with the greatest year-over-year increase in the index were Cleveland (30.7 percent), Las Vegas (24.1 percent), Charlotte, N.C. (23.7 percent), Cincinnati (23.2 percent), and Atlanta (22.2 percent). No metro had a year-over-year decrease in the index in November.