Home Price Growth Continues Firing on All Cylinders in 2015

Home prices continued their widespread growth nationwide over the past year with big gains in October, according to the latest results from the S&P/Case-Shiller.

Year-over-year, home prices reported a 5.2% annual increase in October 2015 compared to a 4.9% gain in September, according to the S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions.

The increases also translated into growth among the 10-City composite, which saw home prices grow 5.1% in the year to October compared to 4.9% previously; and a year-over-year gain of 5.5% in October for the 20-City composite, versus 5.4% reported in September.

On a monthly basis, the National Index posted a modest gain of 0.1% in October compared to September, before the seasonal adjustment. The 10-City and 20-City composites reported similar gains of 0.1% during this time. After the seasonal adjustment, the Index reported a gain of 0.9%, while the 10-City and 20-City composites both increased 0.8% month-over-month.

Furthermore, 10 of 20 cities reported gains in October before the seasonal adjustment; whereas after the adjustment, all 20 cities increased for the month.

San Francisco, Denver and Portland continued to report the highest year-over-year gains among the 20 cities, with another month of double-digit growth of 10.9% for all three metros.

Meanwhile, 12 cities reported higher price increases in the year ending October 2015 compared to the year ending September 2015, with Phoenix having the longest streak of annual increases, reporting a gain of 5.7% in October 2015—its eleventh consecutive increase in annual price gains.

Good economic conditions continue to support gains in home prices, said David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices.

“Among the positive factors are consumers’ expectations of low inflation and further economic growth as well as recent increases in residential construction including single family housing starts,” Blitzer said in a written statement.

Inventories of existing homes have averaged around a five month supply for the past year, a level suggests a fairly tight market with limited supplies, he added. Additionally, sales of new single family homes, despite recent increases in construction, remain “mixed to soft” compared to the trend in existing home sales.

While the recent decision from the Federal Reserve to raise the Fed funds target rate by 25 basis points is leading some to wonder if mortgage interest rates might rise, homebuyers need not worry about being priced out of the market just yet.

“Typically, increases in short term interest rates lead to smaller increases in long term interest rates,” Blitzer said. “The latest economic projections published by the Fed following the recent rate increase suggest that the Fed funds rate will be around 2.6% in September 2017 compared to a current rate of about 0.5%. These data suggest that potential home buyers need not fear runaway mortgage interest rates.”

Written by Jason Oliva

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