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Home prices show no signs of easing


U.S. home prices continued to push into record territory to end 2017. A series of data releases this week tells a story of fast-moving prices at three times the pace of inflation or higher across much of the country. Some indicators suggest that the market may have peaked in some areas, however.

hompricegain“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, chairman of the Index Committee at S&P Dow Jones Indices, following Tuesday’s release of the S&P CoreLogic Case-Shiller index. “Even considering the recovery from the financial crisis, we are experiencing a boom in home prices.”

Case-Shiller’s national index has risen by 38 percent in six years after adjusting for inflation, a real annual gain of 5.3 percent. Across the 20 cities tracked by Case-Shiller, the average increase since the market low point is 62 percent, which compares with the 12.4 percent gain for inflation over the same period.

Nationally, home prices rose 6.3 percent year over year in December, which was a slightly faster pace than the 6.1 percent annual gain in November, Case-Shiller reported. Case-Shiller’s 10-city and 20-city indices rose by 6 percent and 6.3 percent, respectively.

In December, Seattle once again had the highest annual price gain at 12.7 percent, followed by Las Vegas at 11.1 percent and San Francisco, 9.2 percent.  

Blitzer noted, however, that the sales of existing homes and new homes tapered off to end the year, and contract signings have been flat over several months.  

“It is too early to tell if the housing recovery is slowing,” Blitzer said. “If it is, some moderation in price gains could be seen later this year.”

Other price indices released this week also generally pointed to solidly rising prices.

Black Knight reported that home prices gained 6.6 percent in 2017. December marked 68 straight months of annual gains at the national level, the company said. The state of Washington had the highest average annual gain in 2017, at 11.2 percent, followed by California (9.1 percent) and New York (9 percent).

For the month, however, home prices fell in nine of the nation’s 20 largest states, Black Knight said.

The Federal Housing Finance Agency (FHFA) reported that house prices rose 1.6 percent in the fourth quarter and 6.7 year over year. FHFA’s index is based on mortgage data from Fannie Mae and Freddie Mac.

"Home-price appreciation in the fourth quarter showed absolutely no letup throughout the U.S.," said Andrew Leventis, FHFA’s deputy chief economist. He said the agency planned to monitor whether higher mortgage rates and the tax overhaul that reduced homeownership incentives will cool down the home-price growth.

Not all studies, however, suggest that home prices are moving up that quickly in real terms, when wage increases and mortgage rates are factored into the equation. The title company, First American Corp. estimates that real price growth had only gained 40 basis points year over year in December. First American estimates that real home prices are 37 percent below the housing boom peak in July 2006 and 15.5 percent below prices in January 2000. 


 

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