Home prices in May experienced the largest year-over-year increase nationwide since February 2006, according to CoreLogic’s latest Home Price Index. This increase of 12.2% annually marked the 15th consecutive monthly increase in home prices nationally.
"It’s been more than seven years since the housing market last experienced the increases that we saw in May, with indications that the summer months will continue to see significant gains," said Mark Fleming, chief economist for CoreLogic. "As we approach the half-way point of 2013, home prices continue to respond positively to the reductions in home inventory thus far."
Month-over-month, home prices, including distressed sales, rose by 2.6% in May 2013 compared to April 2013.
But the rapid home price recovery has its skeptics.
Anthony Sanders, distinguished professor of real estate at George Mason University, believes home prices are rising too fast compared to underlying economic growth, which is slow. According to Sanders, the rise in prices is an indicator of a housing bubble. "If The Fed withdraws the punch bowl, the party will end quickly," he said.
Sanders added that we are currently experiencing a market that is artifically influenced in a way that is driving up the price of housing.
"Investors are still driving the increase in house prices using Uncle Ben's cheap money. This is not your typical consumer housing bubble, but an investor bubble," said Sanders.
With distressed sales excluded, home prices increased on a year-over-year basis by 11.6% in May 2012 compared to one year before. On a month-over-month basis, with distressed sales excluded, home prices rose 2.3% from April to May.
CoreLogic’s Pending HPI indicates that June 2013 home prices, distressed sales included, are predicted to rise 13.2% year-over-year from June 2012 and will increase by 2.9% month-over-month from May 2013. Without distressed sales included, June 2013 home prices are expected to rise 12% year-over-year from June 2012 and by 2% month-over-month from May 2013.
"Home price appreciation, particularly in much of the western half of the U.S., is increasing at a torrid pace," said Anand Nallathambi, president and CEO of CoreLogic. "Across the country, pent up demand and continued low interest rates are fueling strong demand for a limited inventory of properties. We expect that trend to continue to drive up prices throughout the balance of the summer months."
Nevada was the state with the highest home price appreciation increase, distressed sales included, with prices up 26%, followed by California and Arizona - two states that recorded price increases of 20.2% and 16.9%, respectively.
Only two states posted home price depreciations: Delaware and Alabama, which saw drop of 0.6% and 0.1%, respectively.