Home Prices Up; Demand Falters

Two new reports show home prices continuing their upward arc; but low inventories put a damper on housing demand as fewer would-be homeowners toured homes for sale.

S&P Dow Jones Indices, New York reported home prices jumped by 6.3 percent annually in February from 6.1 percent in January, the 70th consecutive monthly gain. The S&P CoreLogic Case-Shiller Indices said home prices roses by 0.4 percent month over month.

The 10-City Composite annual increase came in at 6.5%, up from 6.0% in the previous month. The 20-City Composite posted a 6.8% year-over-year gain, up from 6.4% in the previous month.

Seattle, Las Vegas, and San Francisco continue to report the highest year-over-year gains among the 20 cities. In February, Seattle led with a 12.7% year-over-year price increase, followed by Las Vegas at 11.6% and San Francisco at 10.1%. Thirteen of the 20 cities reported greater price increases in the year ending February 2018 versus the year ending January 2018.

On a month over month basis, the 10-City and 20-City Composites both reported increases of 0.7%. After seasonal adjustment, the National Index recorded a 0.5% month-over-month increase in February. The 10-City and 20-City Composites both posted 0.8% month-over-month increases. All 20 cities reported increases in February before and after seasonal adjustment.

“Year-over-year prices measured by the National index have increased continuously for the past 70 months, since May 2012,” said David Blitzer, managing director and chairman of the Index Committee with S&P. “Over that time, the price increases averaged 6% per year. This run, which is still ongoing, compares to the previous long run from January 1992 to February 2007, 182 months, when prices averaged 6.1% annually. With expectations for continued economic growth and further employment gains, the current run of rising prices is likely to continue.”

Blitzer added increasing employment supports rising home prices both nationally and locally.

“Job growth is the primary driver behind the rebound in home prices,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “More recently, prices have picked up significantly, however, led by price gains for homes priced below $242,000. Home prices across all price ranges are increasing.”

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

Meanwhile, Redfin, Seattle, said its Housing Demand Index fell by 6.5% in March, despite more people touring homes from February. The index fell to 105 in March, marking the second consecutive month of declines this year. The index is benchmarked to 100 as the three-year historical average.

“Abnormally late winter weather and an early Easter likely delayed homeowners planning to list their homes for sale in March,” said Redfin chief economist Nela Richardson. “While inventory levels are still not nearly high enough to meet strong buyer demand, we do expect new listings to pick up in April and May.”

Redfin said from February to March, the seasonally adjusted number of buyers requesting home tours increased by 2.6 percent, while the number of buyers making offers fell by 14.7 percent. Year over year, the Demand Index declined by 3.8 percent; buyers requesting home tours increased by 6.2 percent, while the number making offers fell by 17.1 percent.

Across 15 metros covered by the Demand Index, the number of homes for sale fell 13.6 percent year over year in March, the 34th consecutive month of falling supply. There were 7.3 percent fewer homes newly listed for sale last month than a year earlier.

However, Redfin noted an early read of inventory in the first half of April suggests the number of homes for sale is increasing in line with seasonal expectations.