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Home Prices Continue to Accelerate

Home prices continued their rise across the country over the last 12 months, according to recent data from the S&P CoreLogic Case-Shiller Indices.

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.1 percent annual gain in July, up from 5.0 percent last month. The 10-City Composite posted a 4.2 percent annual increase, down from 4.3 percent the previous month. The 20-City Composite reported a year-over-year gain of 5.0 percent, down from 5.1 percent in June.

Portland, Seattle, and Denver reported the highest year-over-year gains among the 20 cities over each of the last six months. In July, Portland led the way with a 12.4 percent year-over-year price increase, followed bySeattle at 11.2 percent, and Denver with a 9.4 percent increase. Nine cities reported greater price increases in the year ending July 2016 versus the year ending June 2016.

Before seasonal adjustment, the National Index posted a month-over-month gain of 0.7 percent in July. The 10-City Composite recorded a 0.5 percent month-over-month increase while the 20-City Composite posted a 0.6 percent increase in July. After seasonal adjustment, the National Index recorded a 0.4 percent month-over-month increase, the 10-City Composite posted a 0.1 percent decrease, and the 20-City Composite remains unchanged. After seasonal adjustment, 12 cities saw prices rise, two cities were unchanged, and six cities experienced negative monthly prices changes.

“Both the housing sector and the economy continue to expand with home prices continuing to rise at about a 5 percent annual rate,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The statement issued last week by the Fed after its policy meeting confirms the central bank’s view that the economy will see further gains. Most analysts now expect the Fed to raise interest rates in December. After such Fed action, mortgage rates would still be at historically low levels and would not be a major negative for house prices.

“The S&P CoreLogic Case-Shiller National Index is within 0.6 percent of the record high set in July 2006. Seven of the 20 cities have already set new record highs. The 10-year, 20-year, and National indices have been rising at about 5 percent per year over the last 24 months. Eight of the cities are seeing prices up 6 percent or more in the last year. Given that the overall inflation is a bit below 2 percent, the pace is probably not sustainable over the long term. The run-up to the financial crisis was marked with both rising home prices and rapid growth in mortgage debt. Currently, outstanding mortgage debt on one-to-four family homes is 12.6 percent below the peak seen in the first quarter of 2008 and up less than 2 percent in the last four quarters. There is no reason to fear that another massive collapse is around the corner.”

“Despite recent data pointing to slower sales, home prices continue to rise faster than incomes in many areas,” says Quicken Loans vice president Bill Banfield. “Low inventory will continue to be a challenge for buyers looking for the right home and can cause those bidding to be more aggressive on the house they finally want to purchase.”

For more information, visit www.spdji.com.

Source: FTNJ

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