U.S. home prices continued to steadily rise across through August, according to the latest S&P Dow Jones/S&P CoreLogic Case-Shiller Indices. So much so that David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, said that home price increases in the U.S. “appear to be unstoppable.”
The indices show a 6.1 percent uptick in home prices in August, which is up from 5.9 percent in the previous month. The indices’ overall numbers coalesced with breakdowns of the 10 and 20 largest U.S. metros. The 10-City Composite was just above flat, showing annual increase of 5.3 percent, up from 5.2 percent in July. Similarly, the 20-City Composite posted a 5.9 percent year-over-year gain, up from 5.8 percent the previous month.
Seattle, Las Vegas, and San Diego reported the highest year-over-year gains among the 20 cities in August. Seattle led the way with a 13.2 percent year-over-year price increase, followed by Las Vegas (8.6 percent), and San Diego (7.8 percent). Nine cities reported greater price increases in the year ending August 2017 versus the year ending July 2017.
Month-over-month, the 10-City Composite and 20-City Composite both posted 0.5 percent increases. Nineteen of 20 cities reported increases in August both before and after seasonal adjustment. Atlanta, saw the seasonally adjusted monthly number slip 0.2 percent after seasonal adjustment.
Blitzer said that over the last year, the consumer price index’s 2.2 percent rise was driven largely by energy costs.
“Aside from oil, the only other major item with price gains close to housing was hospital services, which were up 4.6 percent,” he said.
Wages climbed 3.6 percent in the year to August.
“The ongoing rise in home prices poses questions of why prices are climbing and whether they will continue to outpace most of the economy,” Blitzer said. He answered with a strong one-two punch: Low mortgage rates, combined with an improving economy.
“Low interest rates raise the value of both real and financial long-lived assets,” he said. “The price gains are not simply a rebound from the financial crisis.”
However, despite the apparent unstoppability of U.S. housing gains to date, Blitzer offered a caveat of caution.
“Home prices will not rise forever,” he said. “Measures of affordability are beginning to slide, indicating that the pool of buyers is shrinking. The Federal Reserve is pushing short-term interest rates upward and mortgage rates are likely to follow over time, removing a key factor supporting rising home prices.”