The dramatically limited supply of houses for sale is continuing to drive an increase in home prices as buyers are often left fighting over the few houses that are on the market.
According to the latest Case-Shiller Home Price Index from S&P Dow Jones Indices and CoreLogic, there was a 3.5% annual increase in home prices in November 2019, up from 3.2% in October.
That means that prices accelerated faster in November than they did in October, with low inventory serving as one of main factors.
“After a yearlong slowdown in 2019, home values appear primed to go back on the upswing to start 2020. The main driver in this reversal is clearly the ongoing and historic lack of for-sale inventory, though a strong job market, stabilizing geopolitical tensions and still-low mortgage rates have played their part,” Zillow Economist Matthew Speakman said in a response to the Case-Shiller report.
As Speakman notes, inventory is approaching historic lows, which will only exacerbate the affordability problem that many buyers are facing thanks to these continually increasing prices.
“Even taking seasonal factors into consideration, the number of homes available for sale fell consistently through the latter part of 2019 and now sits near the lowest level on record. This lack of homes has made competition among buyers — buoyed by otherwise favorable economic conditions — even more fierce, in turn helping to push up prices even faster,” Speakman said.
“Indeed, homebuying activity has picked up in recent months, with sales of existing homes reaching their highest level in nearly two years in December,” Speakman added.
“But this shortage of homes on the market poses a looming threat to the housing market: Home values are likely to continue to reaccelerate, but many more for-sale homes are needed in order to ensure that price growth is sustainable and not the start of another period of overheated growth that ultimately turns away more buyers than it attracts,” Speakman concluded.
According to the Case-Shiller report, the 10-City and 20-City composites reported a 2% and 2.6% year-over-year increase, respectively.
“The U.S. housing market was stable in November,” said Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices. “With the month’s 3.5% increase in the national composite index, home prices are currently 59% above the trough reached in February 2012, and 15% above their pre-financial crisis peak. November’s results were broad-based, with gains in every city in our 20-city composite.”
According to the index, Phoenix, Charlotte, and Tampa reported the highest year-over-year gains among all of the 20 cities, with no change from the month prior.
“At a regional level, Phoenix retains the top spot for the sixth consecutive month, with a gain of 5.9% for November,” Lazzara said. “Charlotte and Tampa rose by 5.2% and 5% respectively, leading the Southeast region. The Southeast has led all regions since January 2019.”
In November, Phoenix posted a 5.9% year-over-year price increase, followed by Charlotte with a 5.2% increase and Tampa with a 5% increase. Fifteen of the 20 cities reported greater price increases in the year ending November 2019 versus the year ending October 2019, the report said.
“As was the case last month, after a long period of decelerating price increases, the National, 10-city, and 20-city Composites all rose at a modestly faster rate in November than they had done in October,” Lazzara continued. “This increase was broad-based, reflecting data in 15 of 20 cities. It is, of course, still too soon to say whether this marks an end to the deceleration or is merely a pause in the longer-term trend.”