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November's home-price gain puts market in range of 2006 peak

Home prices continued to accelerate nationally and in the major cities in November, pushing the overall market closer to its prerecession price peak, according to the S&P/Case-Shiller Home Prices Indices.

Nationally, prices rose 5.3 percent this past November, compared to a year earlier. That mark is a slightly higher year-over-year gain than was posted in October, Case-Shiller reports. The 20-city composite and 10-city composite indices were up 5.8 percent and 5.3 percent, respectively, compared to November 2014 level. Prices in November also rose in the cities at a slightly higher year-over-year pace than in October.

“Home prices extended their gains, supported by continued low mortgage rates, tight supplies and an improving labor market,” said David Blitzer, managing director and chairman of the Index Committee at the S&P Dow Jones Indices, in a news release.

Blitzer said the housing market has been one of the bright spots in an economy that has shown some signs of weakness. He noted that sales of existing homes rose by a solid 6.5 percent in 2015 compared to 2014, and the consumer side of the economy, including automobile sales, also were strong last year.

Other sectors, such as the oil industry and exports, have been suffering, with the steep drop in oil prices and the strong U.S. dollar.

“Housing is not large enough to offset all of these weak spots,” Blitzer said.  

He also said a tight 4.8 months supply of homes for sale suggests we are in “a seller’s market.”  

Price runups put pressure on affordability 

The National Association of Realtors says that the median price for a U.S. home surpassed the 2006 peak in 2015, at $222,400, without adjusting for inflation.  In cities with double-digit price gains, the supply of new homes has not kept pace with demand,  said NAR analyst Danielle Hale.  Generally speaking, new-home construction has been "subpar" throughout the country, she said, and some cities should consider loosening their permitting restrictions to speed up the timelines for home construction. 

"Nobody is seeing 10 percent growth in incomes," Hale said. "It is a concern where prices have run up so quickly." 

She said NAR expects home sales and prices to slow down in 2016, however. 

"We are starting to get in an area where affordability might impinge on demand a little bit," she said. "We might expect prices to grow at a slightly elevated level, but not as high as we saw in 2015." 

Prices have reached all-time highs in Dallas, Denver, and Portland, Oregon. In November, Portland had the highest year-over-year gain among major U.S. cities, at 11.1 percent, followed by San Francisco and Denver.  

The S&P/Case-Shiller National Home Price Index is about 4.8 percent below the peak set in July 2006, and up 29.2 percent from the bottom in January 2012, Case-Shiller reports.  That figure was consistent with other reports. Based on an evaluation of Fannie Mae and Freddie Mac loans, the Federal Housing Finance Agency said that home prices rose 5.9 percent in the month compared to November 2014.  The index levels for October and November both exceeded the prior peak level from March 2007, the FHFA said.

On Monday, Black Knight Financial Services reported that home prices rose 5.5 percent year over year in November, and have come up 27 percent from the bottom. Black Knight said home prices nationally are just 5.3 percent off its index peak, which occurred in June 2006. 


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