S&P Home Price Index Hits New Peak
Home prices peaked again in November, rising by 5.6 percent on an annual basis in November, the Standard & Poor’s CoreLogic Case-Shiller Home Price Indices reported yesterday.
The report said the overall index rose by 5.6 percent from a year ago and by 0.2 percent from October to November. The 10-City Composite posted a 4.5 percent annual gain and an 0.2 monthly increase; the 20-City Composite reported a 5.3 percent annual gain and an 0.2 percent monthly increase. Before seasonal adjustments, the overall index reported an 0.8 percent monthly increase and the 10- and 20-City Composites both reported 0.9 percent increases.
Seattle, Portland and Denver reported the highest year-over-year gains among the 20 cities over each of the past 10 months. In November, Seattle led with a 10.4 percent year-over-year price increase, followed by Portland with 10.1 percent and Denver with an 8.7 percent increase. Eight cities reported greater price increases in the year ending November from October. Month over month, 10 of 20 cities reported increases in November before seasonal adjustment; after seasonal adjustment, all 20 cities saw prices rise.
“One can argue that housing has recovered from the boom-bust cycle that began a dozen years ago,” said David Blitzer, Managing Director and Chairman of the Index Committee with S&P Dow Jones Indices. “The recovery has been supported by a few economic factors: low interest rates, falling unemployment and consistent gains in per-capita disposable personal income.”
Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., noted the national index has increased faster relative to the city indices over the past year. “We expect this recent trend to continue, as home price appreciation in some larger markets decelerates further,” he said. Prices are firming in some lower-priced markets that were hit hardest during the housing slump.”
S&P reported as of November, average home prices for metro areas within the 10-City and 20-City Composites are back to their winter 2007 levels.
Ralph McLaughlin, chief economist with Trulia, San Francisco, noted that the Censue Bureau reported the national homeownership rate fell to 63.7 percent in 2016. He said while homeownership is down over the year, household formation looks promising.
“At face value, the drop in the homeownership rate isn’t necessarily cause for optimism in the housing market,” McLaughlin said. “After all, first-time homebuyers face significant challenges in today’s market: prices and rents are rising faster than incomes, inventory of starter homes hovers near post-recession lows, and student debt is making it difficult for young households to save up for a down payment. However, the devil is in the detail of the report, and there’s reason to be content with last quarter’s numbers. The continued growth in household formation is good for both the housing market and the general economy. Last quarter, we saw household formation tick up to 0.5% year-over-year, or 805,000 new households, but the increase was made up of more renter households rather than owner-occupied households. This effectively is why the homeownership rate has dropped: a greater share of new households since 2006 have been renters rather than home owners.”
