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A ‘Broader View’ of Home Price Changes

A home price index covering May 2021 showed house prices rising at an annualized rate of 11.5% during the month. The same study showed a 9.9% year-over-year, May 2020-2021, increase, which was slightly higher than the year-over-year increase of 9.3% recorded last month in the same index. That is, the Radian Home Price Index (HPI), published by Red Bell Real Estate. The report is calculated based on the estimated values of more than 70 million unique addresses each month, covering all single-family property types and geographies, according to a news release from Radian.

Radian's SVP of data and analytics Steve Gaenzler explains why his team's research differs from some other similar indices.

"Unlike repeat sales or median price based indices, the Radian Home Price Index generates an estimated value on nearly all homes that make up the U.S. housing stock, every month, providing us a broader and more realistic view of home price changes," Gaenzler said.

He adds that, while home prices have been growing at a higher-than-normal rate, some home price indices do not capture the entire housing crop.

"Recent reports of annual home prices being higher by 20% or more nationally do not represent the entire housing market, but rather the small segment of properties actually sold. This is an incomplete measure of understanding household wealth and equity. These measures only look at the median price of homes sold, not the estimated price change on all homes, including the majority of homes that are not currently on the market. As such, the changing mix of sales will influence the rates of increase reported in these other measures."

The median price for single-family and condominium homes rose to $280,002, Radian reports. And in the past three months, home prices nationally rose 11.5%, slightly higher than the 10.5% reported for the three months from February through April.

While all regions showed increasing appreciation rates, some of the 20-largest metro areas actually recorded lower rates of appreciation from the prior month.

San Francisco was one of Radian's leaders in appreciation.

"Over the past year, the Bay area has not been a leading metro for price appreciation, however, this month it recorded a double digit annualized one-month growth rate for only the third time since the beginning of 2020," Radian reported.

The report showed that three metro areas, Riverside, CA, Phoenix, AZ, and Tampa, FL, all showed substantial slowdowns in appreciation rates.

"The impact of higher vaccination rates, job growth and more interest in homeownership appears to have increased the rate of appreciation," according to Gaenzler. "Moreover, it is common for home prices to accelerate their growth momentum into the summer season."

However, Gaenzler says the mix of homes sold by price band provides valuable information on what is driving home-price growth in median sale indices, and even repeat sales indices.

In May, the percentage of homes sold under $250,000 stood at 30.5% of all sales. This is the lowest percentage recorded since before the Great Recession began. And in contrast, the percentage of homes sold over $500,000 represented 27.2% of all sales, which is more than 3.5 times larger than the 7.5% share recorded just a decade earlier, he pointed out.

"The shift to a larger count of higher-priced homes being sold relative to lower-priced homes has a beneficial impact on the growth rate of indices that only measure home prices of sold properties," he added.

About Author: Christina Hughes Babb

Christina Hughes Babb is a reporter for DS News and MReport. A graduate of Southern Methodist University, she has been a reporter, editor, and publisher in the Dallas area for more than 15 years. During her 10 years at Advocate Media and Dallas Magazine, she published thousands of articles covering local politics, real estate, development, crime, the arts, entertainment, and human interest, among other topics. She has won two national Mayborn School of Journalism Ten Spurs awards for nonfiction, and has penned pieces for Texas Monthly, Salon.com, Dallas Observer, Edible, and the Dallas Morning News, among others. Contact Christina at christina.hughesbabb@thefivestar.com.
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