He added, “While there has not been consistent wage growth above 2.5 percent since the summer of 2009, it was not enough to counteract the upward pressure on real house prices in most local housing markets caused by the post-election increase in mortgage rates and unadjusted house price growth. However, housing continues to be as affordable as it was almost two decades ago.”

We spoke with Fleming about the events that usually precede a decrease in affordability after affordability had been on the rise and what he expects to see in terms of affordability after the recent break in that rise.

GlobeSt.com: What events usually precede a decrease in affordability after a good run of increasing affordability?

Fleming: Affordability is a function of mortgage rates, income and nominal price levels. Two of those factors, mortgage rates and income, are driven by economic health. Nominal price levels reflect the supply-and-demand dynamic in the housing market. In this instance, the preceding events were improving economic health (increasing rates and wage growth), countered by fast overall house-price growth fueled by very tight supply.

GlobeSt.com: Is it typical for decreases to continue after this shift?

Fleming: It really depends mostly on rates. We could easily see relative improvement again in affordability, if rates continue to trend back down from the initial “Trump Bump.”

GlobeSt.com: What do expect to see in terms of affordability after the recent break in increasing affordability?

Fleming: Since our RHPI release reflects November information and we know that mortgage rates have subsequently declined somewhat since mid-December, it's reasonable to expect relative month-over-month improvements again, when we publish our analysis of December, January and February data –unless we get income surprises.

GlobeSt.com: What else should our readers take away from your price index?

Fleming: While rising rates and rapid house-price appreciation more than offset income growth to reduce affordability in November, it is important to note that housing remains, and will likely remain, highly affordable in 2017, when considered from a longer-term perspective.

IRVINE, CA—Affordability is a function of mortgage rates, income and nominal price levels, and the first two are driven by economic health, First American Financial Corp.'s chief economist Mark Fleming tells GlobeSt.com. In the firm's recent Real House Price Index, Fleming analyzed the driving forces that snapped a six-month trend of increasing affordability in November 2016.

“Real purchasing-power adjusted house prices jumped 4.4% month-over-month, reversing a six-month trend of decreases,” Fleming said. “Year-over-year, real house prices have increased 2%. The shift in real house prices signals a decrease in affordability, driven primarily by rising mortgage rates. However, while rates are increasing, they remain very low from a historical standpoint. In contrast, meaningful gains in wages help offset some of the decrease in affordability. Even as rates rise above 4%, housing, on a purchasing-power-adjusted basis, continues to be as affordable as it was almost 18 years ago in April 1999.

Fleming added that we saw a widespread decrease in affordability in November as all but three of the 43 major markets First American tracks saw increasing year-over-year growth in real house prices. “Yet, my research suggests that rising mortgage rates will, over time, moderate price growth more into alignment with the current pace of income growth. While affordability has declined compared to a year ago, housing is still as affordable as it was nearly two decades ago.”

In addition, Fleming said solid wage growth was not enough to offset rising prices. “Wages moderated slightly, growing 2.5% year-over-year in November, which is down from a 2.8% year-over-year pace of growth in October.”

He added, “While there has not been consistent wage growth above 2.5 percent since the summer of 2009, it was not enough to counteract the upward pressure on real house prices in most local housing markets caused by the post-election increase in mortgage rates and unadjusted house price growth. However, housing continues to be as affordable as it was almost two decades ago.”

We spoke with Fleming about the events that usually precede a decrease in affordability after affordability had been on the rise and what he expects to see in terms of affordability after the recent break in that rise.

GlobeSt.com: What events usually precede a decrease in affordability after a good run of increasing affordability?

Fleming: Affordability is a function of mortgage rates, income and nominal price levels. Two of those factors, mortgage rates and income, are driven by economic health. Nominal price levels reflect the supply-and-demand dynamic in the housing market. In this instance, the preceding events were improving economic health (increasing rates and wage growth), countered by fast overall house-price growth fueled by very tight supply.

GlobeSt.com: Is it typical for decreases to continue after this shift?

Fleming: It really depends mostly on rates. We could easily see relative improvement again in affordability, if rates continue to trend back down from the initial “Trump Bump.”

GlobeSt.com: What do expect to see in terms of affordability after the recent break in increasing affordability?

Fleming: Since our RHPI release reflects November information and we know that mortgage rates have subsequently declined somewhat since mid-December, it's reasonable to expect relative month-over-month improvements again, when we publish our analysis of December, January and February data –unless we get income surprises.

GlobeSt.com: What else should our readers take away from your price index?

Fleming: While rising rates and rapid house-price appreciation more than offset income growth to reduce affordability in November, it is important to note that housing remains, and will likely remain, highly affordable in 2017, when considered from a longer-term perspective.