Home Prices Set Record for 5th Straight Month
The first half of the year has been good for home prices–if you’re an owner.
On Monday, Black Knight Financial Services, Jacksonville, Fla., said home prices hit record highs in May for the third consecutive month. Yesterday, the Standard & Poor’s CoreLogic Case-Shiller Home Price Index reported home prices in April posted record highs for the fifth consecutive month, despite a slight annual drop.
The National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.5% annual gain in April, down slightly from 5.6% in March. The 10-City Composite annual increase came in at 4.9%, down from 5.2% the previous month. The 20-City Composite posted a 5.7% year-over-year gain, down from 5.9% in March.
Before seasonal adjustment, the National Index posted a month-over-month gain of 0.9% in April. The 10-City Composite posted a 0.8% increase; the 20-City Composite reported a 0.9% increase. After seasonal adjustment, the National Index recorded an 0.2% month-over-month increase. The 10-City Composite posted an 0.2% month-over-month increase. The 20-City Composite posted an 0.3% month-over-month increase. Eighteen of 20 cities reported increases in April before seasonal adjustment; after seasonal adjustment, 13 cities saw prices rise.
Seattle, Portland, and Dallas reported the highest year-over-year gains among the 20 cities. Seattle led with a 12.9% year-over-year price increase, followed by Portland with 9.3% and Dallas with an 8.4% increase. Seven cities reported greater price increases in the year ending April from a year ago.
“Since demand is exceeding supply and financing is available, there is nothing right now to keep prices from going up,” said David Blitzer Managing Director and Chairman of the Index Committee with S&P Dow Jones Indices. “The increase in real, or inflation-adjusted, home prices in the last three years shows that demand is rising. At the same time, the supply of homes for sale has barely kept pace with demand and the inventory of new or existing homes for sale shrunk down to only a four- month supply. Adding to price pressures, mortgage rates remain close to 4% and affordability is not a significant issue.”
Blitzer said the question is not if home prices can climb without any limit. “Rather, will home price gains gently slow or will they crash and take the economy down with them?” he said. “For the moment, conditions appear favorable for avoiding a crash. Housing starts are trending higher and rising prices may encourage some homeowners to sell. Moreover, mortgage default rates are low and household debt levels are manageable. Total mortgage debt outstanding is $14.4 trillion, about $400 billion below the record set in 2008. Any increase in mortgage interest rates would dampen demand. Household finances should be able to weather a fairly large price drop.”
