S&P Home Price Index at New High
The Standard & Poor’s CoreLogic Case-Shiller Indices peaked for the second straight month, reporting a 5.6 percent annual gain and an 0.2 percent monthly increase.
The 5.6 percent annual gain came on top of a 5.4 percent increases in September. The 10-City Composite posted a 4.3 percent annual increase, up from 4.2 percent the previous month. The 20-City Composite reported a year-over-year gain of 5.1 percent, up from 5.0 percent in September.
Seattle, Portland, and Denver reported the highest year-over-year gains among the 20 cities over each of the past nine months. In October, Seattle led the way with a 10.7% year-over-year price increase, followed by Portland with 10.3%, and Denver with an 8.3% increase. Ten cities reported greater price increases in the year ending October versus the year ending September.
Before seasonal adjustment, the National Index posted a month-over-month gain of 0.2% in October. The 10-City Composite remains unchanged and the 20-City Composite posted a 0.1% increase in October. After seasonal adjustment, the National Index recorded a 0.9% month-over-month increase, while both the 10-City and 20-City Composites each reported a 0.6% month-over-month increase. 13 of 20 cities reported increases in September before seasonal adjustment; after seasonal adjustment, all 20 cities saw prices rise.
“Home prices and the economy are both enjoying robust numbers,” says David Blitzer, Managing Director & Chairman of the Index Committee with S&P Dow Jones Indices. “However, mortgage interest rates rose in November and are expected to rise further as home prices continue to out-pace gains in wages and personal income. Affordability measures based on median incomes, home prices and mortgage rates show declines of 20-30% since home prices bottomed in 2012. With the current high consumer confidence numbers and low unemployment rate, affordability trends do not suggest an immediate reversal in home price trends. Nevertheless, home prices cannot rise faster than incomes and inflation indefinitely.”
The report said as of October, average home prices for metros within the 10-City and 20-City Composites are back to their winter 2007 levels.
“Modest gains in home sales amid unusually tight inventories continue to make it a sellers’ market in much of the country,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “Prices are rising the fastest in areas where the tech boom is fueling job growth, including Seattle, Portland and Denver. Price increases have moderated in many gateway markets, however, most notably New York City, Chicago and Washington D.C., where overseas’ buyer interest has cooled.”
Vitner said the recent split between the three broad Case Shiller home price measures should become more apparent in 2017, as the stronger dollar further cools demand by overseas buyers. “Rising mortgage rates will also likely push domestic buyers more toward lower-priced suburban markets. Prices have more room to recover outside the larger metro areas, which is one reason the national index is up more than the narrower 20-city and 10-city indices.”
