S&P: Home Prices Up as Other Indicators Level Off

Home prices continued to push upward on a year over year basis, up by 5.9 percent from a year ago and by 0.7 percent from a month ago, said S&P Dow Jones Indices, New York.

The S&P CoreLogic Case-Shiller Indices reported a 5.9% annual gain in July, up from 5.8% in June. The 10-City Composite annual increase came in at 5.2%, up from 4.9%; the 20-City Composite posted a 5.8% year-over-year gain, up from 5.6%.

Before seasonal adjustment, the National Index posted a month-over-month gain of 0.7% in July. The 10-City and 20-City Composites reported increases of 0.8% and 0.7% respectively in July. After seasonal adjustment, the National Index recorded a 0.5% month-over-month increase. The 10-City Composite posted a 0.4% month-over-month increase. The 20-City Composite posted a 0.3% month-over-month increase. All 20 cities reported increases in July before seasonal adjustment; after seasonal adjustment, 17 cities saw prices rise.

Seattle, Portland and Las Vegas reported the highest year-over-year gains among the 20 cities. In July, Seattle led the way with a 13.5% year-over-year price increase, followed by Portland at 7.6% and Las Vegas at 7.4%. Twelve cities reported greater price increases in the year ending July versus the year ending June.

“Consumers, through home buying and other spending, are the driving force in the current economic expansion,” said David Blitzer, Managing Director and Chairman of the Index Committee with S&P Dow Jones Indices.

Blitzer noted, however, while home prices continued to rise, other housing indicators could be leveling off.

“Sales of both new and existing homes have slipped since last March,” Blitzer said. “The Builders Sentiment Index published by the National Association of Home Builders also leveled off after March. Automobiles are the second largest consumer purchase most people make after houses. Auto sales peaked last November and have been flat to slightly lower since.”

Blitzer said the housing market will face two contradicting challenges during the rest of 2017 and into 2018. “First, rebuilding following hurricanes across Texas, Florida and other parts of the south will lead to further supply pressures,” he said. “Second, the Fed’s recent move to shrink its balance sheet could push mortgage rates upward.”

The report said as of July, average home prices for the MSAs within the 10-City and 20-City Composites are back to their winter 2007 levels.

Mark Vitner, senior economist with Wells Fargo Securities, said emerging markets such as Seattle continue to drive the 20-City index.

“The 20-City index continues to lead the 10-City index due to the inclusion of red-hot markets like Seattle and Portland,” Vitner said. “Price appreciation has also slowed in some large older markets, most notably Chicago, which posted the smallest monthly gain in July. While home prices have been booming in the Pacific Northwest for some time, Denver and Dallas have, by far, seen the greatest rise in home prices relative to their previous highs.”