Home Price Report Roundup: Yep, Home Prices are Up

This week’s home price reports confirm that not only are home prices continuing to rise, they don’t appear to have yet hit a ceiling.

S&P Dow Jones Indices, New York, reported yesterday its S&P CoreLogic Case-Shiller Home Price Indices showed a 6.3% annual gain in December, up from 6.1% in November. The 10-City Composite annual increase came in at 6.0%, no change from November. The 20-City Composite posted a 6.3% year-over-year gain, down from 6.4% in November.

Before seasonal adjustment, the National Index posted a month-over-month gain of 0.2% in December. The 10-City and 20-City Composites both reported increases of 0.2%. After seasonal adjustment, the National Index recorded a 0.7% month-over-month increase in December. The 10-City and 20-City Composites both posted 0.6% month-over-month increases. Twelve of the 20 cities reported increases in December before seasonal adjustment, while all 20 cities reported increases after seasonal adjustment.

Seattle, Las Vegas and San Francisco reported the highest year-over-year gains among the 20 cities. In December, Seattle led the way with a 12.7% year-over-year price increase, followed by Las Vegas with at 11.1% and San Francisco at 9.2%. Nine cities reported greater price increases in the year ending December.

“The rise in home prices should be causing the same nervous wonder aimed at the stock market after its recent bout of volatility,” says David Blitzer, Managing Director and Chairman of the Index Committee with S&P Dow Jones Indices. “Within the last few months, there are beginning to be some signs that gains in housing may be leveling off.

Home prices are in the midst of a boom,” said Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C. “Since bottoming in 2012 and adjusted for inflation, the HPI has risen 38 percent for a real annual gain of 5.3 percent per year. Since 1976, the HPI’s annual gain averaged just 1.3 percent.”

Vitner cautioned the persistent rise in home prices is reducing affordability. “With interest rates rising, home sales look a little more vulnerable, as evidenced by yesterday’s drop in new home sales,” he said.

Cheryl Young, senior economist with Trulia, San Francisco, agreed. “The stage is set for another tough home buying season as scarce inventory plagues the housing market,” she said. “Starter home buyers will again bear the brunt of frustration as affordability remains out of reach, exacerbated by mortgage rates marching upwards to usher in 2018.”

And on a positive tack, Mark Fleming, chief economist with First American Financial Corp., Santa Ana, Calif., said despite rising home prices, homes in many markets remain relatively affordable. The company’s Real House Price Index said while real house prices increased by 0.4 percent between November and December and by 0.4 percent year over year, consumer house-buying power, thanks to rising wages, increased by 0.1 percent between November and December and by 5.6 percent year over year.

The report said relatively speaking, real house prices are 37.1 percent below their housing boom peak in July 2006 and 15.5 percent below the level of prices in January 2000.

“Rising household income has largely offset the increase in borrowing costs brought about by higher interest rates in the past year,” Fleming said. “Most of the markets we monitor in our Real House Price Index have more than enough house-buying power when compared to the average house prices in the market. It’s important to remember that rising mortgage rates are often the result of positive economic conditions, like rising incomes and strong economic performance. In 2018, home buyers may have to take the good, wage growth, with the bad, rising mortgage rates.”

Earlier this week, Black Knight, Jacksonville, Fla., reported U.S. home prices edged up slightly in December, closing the year 6.6 percent from a year ago. December marked 68 consecutive months of annual home price appreciation.

Black Knight said the average home price reached a record $283,000, up by 0.1 percent from November. New York once again led all states in monthly gains, with home prices up 1.71 percent over November. Ohio experienced the most negative movement, with home prices there falling 1.13 percent from November, and accounting for seven of the nation’s 10 worst-performing metros of the month. Home prices fell in nine of the nation’s 20 largest states, while six others hit new peaks. Similarly, while 11 of the 40 largest metros hit new home price peaks in December, prices fell in another 20.