He said: “In September, house-buying power was more than $170,000 above the median sale price nationally, indicating that the housing market may even be undervalued.
“It may be hard to believe but, once adjusted for consumer house-buying power, housing is undervalued in most markets and the gap between house-buying power and median sale prices indicates there remains room for continued house price growth.”
The key difference between real and nominal price growth is that the latter is not adjusted for inflation. The RHPI reported that real house prices in the US were 9.4% less expensive than in January 2000, while only four of the 50 markets were overvalued as they had a median sale price that exceeded house-buying power in September. These were all coastal cities in California – Los Angeles, San Francisco, San Jose and San Diego.
The remainder were undervalued housing markets, according to the RHPI, including those areas that were generally considered expensive, such as Seattle, Washington DC and Boston.
“The reason many other expensive markets are more affordable is due to high household incomes – the more you earn, the more you pay,” Fleming added.