7.27.2016 | House Prices Grow by 5% – Rusty Tweed team
House Prices Spike of 5.2% Over 12 Month Period
TheS&P CoreLogic Case-Shiller survey looks at U.S. house prices in 20 metropolitan areas nationwide. As a result, its home price indices are the leading measures of U.S. residential real estate nationally and in these 20 cities.
It reveals a 5.2% spike of house prices countrywide over a 12 month period. After seasonal adjustment, house prices nationwide dropped by 0.1% in May.
Portland saw the fastest growth in its house prices at 12.5% over the 12 month period, while New York and D.C. are among the weakest areas of the country. Eight cities had more rapid annual price appreciation in May than in April.
Shifting Regional Patterns in House Price Increases
Regional patterns are shifting, according to David Blitzer, managing director of the index committee at S&P Dow Jones Indices. Areas that were previously strong such as Los Angeles, San Diego and San Francisco are seeing more modest rises of 5.4%, 6.4% and 6.5% respectively. Meanwhile, prices in the Pacific Northwest boom. Seattle also saw a significant growth of 10.7% over the 12 month period. New York’s change across the same period was only 2% and Washington D.C. was not far in front with 2.4%.
The 20-city composite is up 40.4% from its lowest point in 2012. It is down 8.8% from its peak in 2006.
House Prices are Historically High Compared to Inflation
In the 12 months ending May, consumer prices increased by only 1%. The disproportionate growth of U.S. home prices to inflation is worth following closely. If the economy doesn’t improve at the same rate as house prices, prices will inevitably begin to decelerate, if not fall.
Robert Brusca, chief economist of FAO Economics, recently pointed out that the trend in house prices has been decelerating despite mortgage rates remaining at record lows. He says house prices look overvalued, therefore “it’s a great time to sell your house”. Brusca pointed out that in the Conference Board consumer confidence report published last Tuesday, expectations for interest rates and inflation declined.
Expectations for higher interest rates in 12 months’ time fell to a three-year low of 51.7% in July from 59.4% in June. The expectation for inflation in 12 months dropped to 4.7%, the lowest rate in more than nine years.