Case Shiller: Home prices reach new highs in key housing markets
April marks sixth consecutive home-price increase of at least 5%
Home prices continue to increase nationwide, even hitting new highs in several large housing markets in April, according to S&P Dow Jones Indices Case-Shiller Home Prices Indices released today.
Home prices increased 5% in April, down from an increase of 5.1% the month before. The 10-city composite increased by 4.7%, a decrease from March’s 4.8% gain and the 20-city composite increased by 5.4%, down from an increase of 5.5% the month before.
This marks the sixth consecutive month where home prices increased at more than 5%, according to the indices.
“While the housing market continues to moderate, the rate of price gains is still outpacing income growth,” Trulia Chief Economist Ralph McLaughlin said. “Housing affordability continues to be a headwind for homebuyers in many of the country’s largest markets.”
The market with the highest annual gain among the 20 cities was Portland, Oregon with an increase of 12.3%. Seattle, Washington came in second with an increase of 10.7%, followed by Denver, Colorado with an increase of 9.5%. Nine cities reported higher prices for the year ending in April 2016 than the year ending in March 2016.
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(Source: S&P Dow Jones Indices and CoreLogic)
“The housing sector continues to turn in a strong price performance with the S&P/Case-Shiller National Index rising at a 5% or greater annual rate for six consecutive months,” said David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices.
“The home price increases reflect the low unemployment rate, low mortgage interest rates, and consumers’ generally positive outlook,” Blitzer said. “One result is that an increasing number of cities have surpassed the high prices seen before the Great Recession. Currently, seven cities, Denver, Dallas, Portland, San Francisco, Seattle, Charlotte, and Boston, are setting new highs.”
Before seasonal adjustments, the National Index and the 10-City Composite increased by 1% from April. The 20-City Composite increased 1.1% from April.
After seasonal adjustments, however, the increase was much lower. The National Index increased 0.1% from April, while the 10-City Composite increased by 0.3% and the 20-City Composite increased by 0.5%.
After seasonal adjustment, 15 cities increased in home prices, two cities remained the same and three cities decreased in home prices.
Blitzer also warns of the effect Brexit could have in the coming months.
“However, the outlook is not without a lot of uncertainty and some risk,” he said. “Last week’s vote by Great Britain to leave the European Union is the most recent political concern while the U.S. elections in the fall raise uncertainty and will distract home buyers and investors in the coming months.”
“The details in the S&P/Case-Shiller Home Price data also hint at possible softness,” Blitzer said. “Seasonally adjusted figures in the report show that three cities saw lower prices in April compared to only one city in March. Among the 20 cities, 16 saw either declines or smaller increases in monthly prices in the seasonally adjusted numbers.”
Some experts predict, however, that the Brexit vote could decrease mortgage rates, and therefore increase the demand for housing, and raise home prices still further.
“Today’s Case-Shiller data shows continued fast growth in the housing market, but there is also a growing divide between the top and bottom of the market that the Case-Shiller numbers don’t reveal,” Zillow Chief Economist Svenja Gudell said. “Conditions nationwide and in most large metros are much more forgiving for current homeowners looking to move into a bigger, more expensive home than for younger, entry-level buyers just looking to get a toe-hold in the market.”
“Home values for the least-expensive homes are growing twice as quickly as they are for the most-expensive homes, and the gap is widening,” Gudell said. “Given last week’s Brexit news and the ensuing market reaction, it doesn’t look like interest rates are going to rise meaningfully any time soon, which means it will remain cheap to finance a home for those that can afford one. But for many buyers, finding an affordable home to buy in the first place is likely to remain pretty tough.”