Home Prices Post Strongest Gains in 6 Months
Home prices saw their strongest gains in six months, the Standard & Poor’s/Case-Shiller Home Price Indices reported yesterday.
The U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a slightly higher year-over-year gain with a 4.7 percent annual increase in August compared to 4.6 percent in July. The 10-City Composite increased by 4.7 percent in August compared to 4.5 percent in July; the 20-City Composite’s year-over-year gain was 5.1 percent versus 4.9 percent in July.
Before seasonal adjustment, the National Index posted a gain of 0.3 percent month-over-month in August. The 10-City Composite and 20-City Composite both reported gains of 0.3 percent and 0.4 percent month-over-month, respectively. After seasonal adjustment, the National Index posted a gain of 0.4 percent, while the 10-City and 20-City Composites both increased 0.1 percent month-over-month.
Eighteen of 20 cities reported increases in August before seasonal adjustment; after seasonal adjustment, five were down, 11 were up, and four were unchanged. San Francisco, Denver and Portland, Ore., reported the highest year-over-year gains among the 20 cities with price increases of 10.7 percent, 10.7 percent and 9.4 percent, respectively.
As of August, average home prices for Metropolitan Statistical Areas within the 10-City and 20-City Composites are back to their winter 2007 levels. Measured from their June/July 2006 peaks, the peak-to-current decline for both Composites is 11-13 percent. Since March 2012 lows, the 10-City and 20-City Composites have recovered 34.8 percent and 36.1 percent, respectively.
“The rebound from the recent lows was faster than the 1997-2005 housing boom, and also much less driven by inflation,” said David Blitzer, managing director and chairman of the Index Committee for S&P Dow Jones Indices.
“While seasonal factors often wreak havoc and cause month to month variation in the Case-Shiller HPI, one trend that appears to still be firmly in place is that prices are rising the fastest in markets where job growth and net migration are the strongest and inventories are the tightest,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “Portland is an excellent example. We also expect homebuilding activity to pick up. More supply on the market should help ease some of the pressure on home prices in 2016.”
Earlier this week, Black Knight Financial Services, Jacksonville, Fla., released its Home Price Index report, matching the S&P numbers, showing U.S. home prices rose by 0.3 percent for the month and 5.5 percent on a year-over- year basis. Black Knight reported national home prices up by 5.6 percent since the beginning of the year and by 27 percent since the bottom of the market at the start of 2012.
At $253,000, the national level HPI is now just 5.3 percent off its June 2006 peak of $268,000.
New York led gains among the states, seeing 1.8 percent month-over-month appreciation and accounted for every one of the month’s top 10 metro area movers as well. Among the nation’s 20 largest states, three hit new peaks again in August: New York ($358,000), Tennessee ($177,000) and Texas ($215,000). Illinois saw the most negative movement (-0.5 percent) among all states; eight other states also saw home prices fall in August.
The report said Illinois also accounted for seven of the 10 worst-performing metro areas, with home prices in Decatur, Peoria, Kankakee and Springfield all falling by 0.9 percent from July. Las Vegas, while up 62 percent from the market’s bottom, is still more than 37 percent off its May 2006 pre-crisis peak, the most of any of the 40 largest metros.
Also this week, the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey said early indications suggest a healthy housing market this fall. The report said a variety of metrics came in strong in September.
The report said prices on non-distressed properties have increased fairly steadily since last November, hitting $296,700 in September, based on a three-month moving average. Prices on non-distressed properties rose by 8.6 percent in September compared to a year ago.
The survey also noted sales-to-list price ratios continue to indicate strong demand from buyers. For non-distressed properties, the average sales-to-list price ratio was 97.8 percent in September, up from 97.5 percent a year ago. All three states on the west coast maintained sales-to-list price ratios above 100 percent in September.
“There was a very strong trend upward for non-distressed home prices, sales-to-list price ratios were ahead of the levels seen a year ago and the average time-on-market remained low,” said Tom Popik, research director for Campbell Surveys.
The survey said non-distressed properties sold in September were on the market for an average of 8.0 weeks, down from an average of 9.0 weeks a year ago. The distressed property share of home sales also increased in September after six months of declines. Short sales and real-estate owned properties accounted for 17.5 percent of home sales in September, up from a 16.6 percent share the previous month and down from a 21.3 percent share in September 2014.
