A new data report from First American Financial Corp. (NYSE: FAF) has determined homeownership affordability is near a four-year high, although current economic tumult may create a new wave of problems.
“Affordability began 2026 on its strongest footing since August 2022,” said First American Chief Economist Mark Fleming. “In January, the First American Data & Analytics Real House Price Index (RHPI) shows affordability improved nearly 11% compared with a year ago. The improvement in affordability reflects a favorable combination of factors – mortgage rates were 0.9 percentage points lower than a year ago, nominal house price growth nationally slowed to 0.6%, and household income increased by 3.1%. Notably, income growth has outpaced house price growth for 19 consecutive months.”
However, Fleming noted affordability remained more than 60% below its pre-pandemic five-year average while the recent uptick in mortgage rates would like “blunt improvement in affordability.” But he was optimistic that it would not prove lethal.
“Affordability is not determined by mortgage rates alone. Income growth and house price trends remain critical,” he continued. “If price growth stays subdued, or declines continue in some markets, and incomes keep rising, those factors can help offset, or at least mitigate, the impact of higher mortgage rates. Ultimately, affordability is determined by the interplay between mortgage rates, home prices and household incomes, and how those forces evolve across local markets.”
Fleming pointed out that the markets with the largest affordability gains were notable because of their declining nominal house prices. Cape Coral, Florida, was the most improved among the nation’s top 100 markets, with affordability up more than 17% year-over-year. New Haven, Connecticut, was the only market where affordability declined from one year ago, with house prices rising nearly 13%.
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