Home prices continue to rise, according to the latest S&P CoreLogic Case-Shiller Indices for March 2018 that were released by S&P Dow Jones Indices [1] on Tuesday. The data on the U.S. National Home Price NSA Index covered by these indices [2] indicated that, nationally, home prices reported a 6.5 percent annual gain in March, remaining unchanged over the gains reported in February 2018. The 20-City Composite Index also remained unchanged and posted a 6.8 percent gain year-over-year. The 10-City Composite Index grew from 6.4 percent in February 2018 to 6.5 percent in March.
The year-over-year gains on the 20-City Composite were led by Seattle, Las Vegas, and San Francisco with double-digit increases. According to the Index, while Seattle reported a year-over-year price increase of 13 percent, Las Vegas and San Francisco reported price gains of 12.4 percent and 11.3 percent, respectively. The report found 12 of the 20 cities reported “greater price increases in the year ending March 2018, versus February 2018.”
“While Seattle has been the city with the largest gains for 19 months, the ranking among other cities varies,” said David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Las Vegas and San Francisco saw the second and third largest annual gains of 12.4 percent and 11.3 percent. A year ago, they ranked tenth and sixteenth. Any doubts that real, or inflation-adjusted, home prices are climbing rapidly are eliminated by considering Chicago; the city reported the lowest 12-month gain among all cities in the index of 2.8 percent, almost a percentage point ahead of the inflation rate.”
Even though Seattle showed the highest price increase during the month, the gains are widespread according to Danielle Hale, Chief Economist at Realtor.com [3]. “All 20 cities saw price gains with the smallest in Chicago, Washington, D.C., and Cleveland,” Hale said. “Despite the trend of rising prices, a look at preliminary Realtor.com May housing data shows that listing price growth slowed in May. This could signal slower growth in home sales prices in the months ahead—a good turn of events for buyers.”
Be that as it may, buyers will still have to contend with low housing supply [4] this summer, which has also contributed to the growth in home prices.
“Rising home prices continued in March amid strong economic conditions for would-be home buyers; unemployment remained low and job growth steady,” said Cheryl Young, Senior Economist at Trulia [5]. “These strong consumer fundamentals drove demand as peak home buying season ramped up. Robust demand paired with abysmally low inventory contributed to surging home prices.”
Young also pointed out to rising mortgage rates that could make this summer a tough season for potential homebuyers. “As if increasing home prices weren’t enough—beleaguered would-be homebuyers faced mortgage rates hitting four-year highs.”
Blitzer agreed though he pointed out that compared to the price gains of the last housing boom in the 2000s things were much calmer. “Months-supply, which combines inventory levels and sales, is currently at 3.8 months, lower than the levels of the 1990s, before the housing boom and bust,” he said. “Until inventories increase faster than sales, or the economy slows significantly, home prices are likely to continue rising.”