As Seattle continues to problem-solve around the issues of the city’s high cost of living and lack of affordable housing, it seems some economic winds are blowing in the right direction, with a new study showing the city ranks second nationally in year-over-year growth in home affordability as of this past April.
Title insurer First American Financial Corp., which tracks housing affordability through its Real House Price Index (RHPI), attributes the growth in affordability in Seattle’s housing market to declining mortgage rates over the period coupled with increases in household income. A decrease in the RHPI score equates to an increase in housing affordability.
Seattle recorded a 6.9% decline in the RHPI over the year ending this past April, fueled by a 4.7% increase in household income ― which offset a 2% rise in house prices over the period. In fact, in the top four markets for home-affordability improvement, household-income growth exceeded house-price growth.
For Seattle, according to First American, the decline in the RHPI over the period equates to a house-buying power increase of 8.8%. For the state of Washington, the study placed the average present-value of a home at $446,364, with a 2.1% statewide decline in the RHPI.
“Two of the three key drivers of the RHPI, household income and mortgage rates, swung in favor of increased affordability in April. The 30-year, fixed-rate mortgage fell by 0.33 percentage points and household income [nationally] increased 2.7 percent, compared to April 2018,” says Mark Fleming, chief economist at First American. “When household income rises, consumer house-buying power increases. Declining mortgage rates have a similar impact on affordability.”
In addition to Seattle, the other four markets recording the highest RHPI declines were all on the West Coast: San Jose, California, -8.6%; Portland, Oregon, -4.5%; San Francisco, -4.3% and Los Angeles, -3.1%.
The five markets where the RHPI increased the most were Providence, Rhode Island, +5.9%; Las Vegas, +5.2%; Salt Lake City, +4.4%; Orlando, Florida, +3.9%; and Atlanta, +3.7%. Overall, housing affordability improved over year as of this past April in 18 of the 44 markets tracked by the RHPI.