Case-Shiller: US Home Prices Increased 0.7% In December

Brittany BishopMar 02, 2017

Seattle; Portland, Ore.; and Denver reported the highest year-over-year gains among the 20 cities over the 11 months leading up to December.

The 10-City Composite, a value-weighted average of the top 10 metro area indices, saw a 4.9 percent year-over-year increase, while the 20-City Composite, a value-weighted average of the top 20 metro area indices, jumped 5.6 percent.

The lowest increases were in Washington, D.C., at 4.2 percent and NY at 3.1 percent. He said that some people might naturally assume that prices are rising too quickly for a normal market and "could be heading for a fall", but he argued against that.

Home prices have now risen in each of the past six months after falling in each of the prior three months.

USA single-family home prices accelerated at a faster pace than expected in December on the back of a low inventory of housing stock, a survey showed on Tuesday.

"Driven in part by a healthy economy and near-historic low inventory, the USA housing market is showing signs of picking up steam", said Ralph McLaughlin, chief economist for the real estate website Trulia. This is up from November's increase of 5.6% and sets a 30-month high.

But while home prices are increasing across the US, the speed of increase is not alarming. If this were to continue that would mean that eventually Chicago would rise in the rankings of annual appreciation rates. New home sales at 555,000 in 2016 are up from recent years but remain below the average pace of 700,000 per year since 1990. With seasonal adjustment, all cities in the 20-City Composite saw prices increase. Since 1975, the average pace is 1.3 percent; about two-thirds of the time, the rate is between -4 percent and +7 percent.

When adjusted for inflation, the annual gain in home prices has been 3.8 percent.

And while rising home prices can trigger concerns about inflation, Blitzer said that the speed at which they are now growing "is not alarming", citing low inventory as a factor for the rise.

Historically low mortgage rates are also pushing home prices up, according to Blitzer. "A 30-year fixed rate mortgage today is 4.2 percent compared to the 6.4 percent average since 1990".

Wages increased 2.5% in the year ending in January, better than the 2% gains that were common earlier in the recovery but still much slower than the rate of home-price growth.

December's numbers reflect the peak of a sharp rise in mortgage rates following the US election.

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