Home prices saw a slight increase in nine cities covered by the S&P/Case-Shiller Home Price Indices in December.
Both the 10-City and 20-City Composites saw year-over-year increases in December compared to November.
The 10-City Composite gained 4.3% year-over-year, up from 4.2% in November. The 20-City Composite gained 4.5% year-over-year, compared to a 4.3% increase in November.
The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 4.6% annual gain in December 2014 versus 4.7% in November.
“The for-sale housing market made great strides toward ‘normal’ in 2014, as runaway appreciation cooled markedly and negative equity fell significantly. But anyone looking to see how far from truly ‘normal’ the market remains need look no further than the red-hot rental market, and its implications on the broader housing market going forward,” said Zillow Group (Z) Chief Economist Stan Humphries. “Many current renters could likely realize significant monthly savings by buying a home now and taking advantage of terrific affordability driven by low mortgage rates and home prices that remain below peak in most areas."
The fastest year-over-year gains were in San Francisco and Miami, where prices rose 9.3% and 8.4% over the last 12 months. Twelve cities, including Cleveland, Denver, and Seattle, saw prices rise faster in the year to December than a month earlier. Las Vegas led the declining annual returns with 6.9%, down from 7.7% annually.
The National index was slightly negative in December, while both composite Indices were positive. Both the 10- and 20-City Composites reported slight increases of 0.1%, while the National Index posted a -0.1% change for the month. Miami and Denver led all cities in December with increases of 0.7% and 0.5% respectively. Chicago and Cleveland offset those gains by reporting decreases of -0.9% and -0.5% respectively.
“The housing recovery is faltering. While prices and sales of existing homes are close to normal, construction and new home sales remain weak. Before the current business cycle, any time housing starts were at their current level of about one million at annual rates, the economy was in a recession” says David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “The softness in housing is despite favorable conditions elsewhere in the economy: strong job growth, a declining unemployment rate, continued low interest rates and positive consumer confidence.
The western half of the nation plus Miami and Atlanta enjoyed year-over-year increases of 5% or more. San Francisco and Miami were the strongest.
Dallas, Denver, Las Vegas and Atlanta also experienced solid gains. Phoenix was an exception to the western strength with only a 2.4% increase; San Diego was a bit under 5% at 4.8%. The Midwest and Northeast lagged. Boston was the strongest among this weak group with prices up 3.8%.
The regional patterns and the weakness in new construction and new sales may reflect decreasing mobility – fewer people moving to different parts of the country or seeking jobs in different regions.
“But even while buying a home is essentially as affordable as it’s ever been, renting is less affordable than ever,” Humphries said. “Widespread and rapid growth in rents, combined with stagnant wages, are keeping many would-be buyers stuck in rental housing, writing ever-larger checks to their landlords instead of saving for a down payment.
“Real growth in wages and more rental supply will help ease the crunch, but don’t expect either overnight,” Humphries said.