Case Shiller Price Index Shows Home Prices Are Still Increasing
Home prices are still rising, but at a slower pace according to the S&P Case-Shiller Home Price Indices for June. Home prices for the cities surveyed in the HPI rose by 12.10 percent on an annual basis as compared to May’s reading of 12.20 percent.
This is the highest rate of monthly growth for home prices since the peak of the housing bubble in 2006.
June’s home prices remained approximately 23 percent lower than peak prices, but economists consider the bubble peak an anomaly and caution against comparing current home prices to the peak prices seen in 2006.
Overall Housing Price Increase Strongly
Regional home prices reported in June’s HMI were mixed. Case-Shiller publishes a 10-city Index and a 20-city Index of home prices. 13 of 20 cities saw their rates of rising home prices decline from May to June.
Atlanta posted the highest month-to-month gain in home prices at 3.40 percent. Washington, D.C. posted the slowest month-to-month gain in home prices at 1.00 percent.
New York City posted a monthly gain of 2.10 percent in home prices in June; this was its highest rate of increase since 2002.
Both S&P Case-Shiller Home Price Indices for June showed annual growth in home prices. The 10-city index posted an annual gain of 11.90 percent and the 20-city Index posted an annual growth rate of 12.10 percent. Las Vegas enjoyed the highest annual rate of home price growth at 24.90 percent.
In year-over-year price gains, Las Vegas and San Francisco’s gains exceeded 20.00 percent, while Atlanta, Detroit and Phoenix posted year-over-year gains of 19.00 percent, 16.40 percent and 19.80 percent respectively.
These figures suggest there’s plenty of room before prices begin to fall, but David M. Blitzer, chairman of the Index Committee and S&P Dow Jones Indices, noted that “the monthly city-by-city data show the pace of price increases is moderating.”
Rising Mortgage Rates, Limited Supply Of Homes Slowing Home Price Growth
Mortgage rates remain historically low, but have risen sharply over the last few weeks. This trend, coupled with persistently low inventories of available homes is seen as a significant reason for slower growth in home prices.
Investors and would-be home buyers are also waiting to see if the Federal Reserve reduces its monthly stimulus program; such a reduction would likely cause mortgage rates to rise further.
The Fed has not set a date for “tapering” its monthly stimulus, but has indicated it will do so soon if economic conditions continue to improve.