Affordability declined in 49 of the 50 major markets according to the May 2021 First American Real House Price Index. 

For the third month in a row, housing affordability has declined on a year-over-year basis in May, coming off a two-year streak of rising affordability, according to the May 2021 First American Real House Price Index. Overall, affordability declined in 49 of the 50 major markets.

First American Chief Economist Mark Fleming says May’s decline occurred even as two of the three Real House Price Index drivers, household income and mortgage rates, were favorable to greater affordability compared to last year. 

“House-buying power increased by 8% in May compared with a year ago, propelled by lower mortgage rates and higher household income,” Fleming said in a release. “The affordability gains from house-buying power, however, were offset by the third component of the RHPI, nominal house price appreciation, which reached a record 18% in May, surpassing the previous peak from 2005.” 

He also noted that these trends are not necessarily reflected locally as they can vary greatly from city to city. 

Five markets saw the greatest year-over-year affordability decline. Phoenix dropped 22.7%. Seattle was down 20.1%. Kansas City, Mo declined 19.6%. Tampa, Florida dropped 17.8% and Las Vegas was down 17.2%. 

These declines could price out potential homebuyers, decreasing the intense bidding wars of the past year and allowing home price appreciations to moderate. 

“The increase in housing inventory may likewise ease pressure on nominal house price growth, though the increase remains small relative to historic levels and the broader housing supply shortage is likely to take years to reverse,” said Fleming. “Affordability trends in the coming months will depend on the supply and demand dynamics behind nominal house price appreciation – dynamics which will play out differently in each market.”