Home prices rose across the country during the 12 months leading up to April 2017,…
Home prices rose across the country during the 12 months leading up to April 2017, according to newly-released data from the S&P CoreLogic Case-Shiller Indices, a key measure of U.S. home prices.
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.5% annual gain in April, down from 5.6% last month. The 10-City Composite annual increase came in at 4.9%, down from 5.2% the previous month. The 20-City Composite posted a 5.7% year-over-year gain, down from 5.9% in March.
Seattle, Portland, and Dallas reported the highest year-over-year gains among the 20 cities. In April, Seattle led the way with a 12.9% year-over-year price increase, followed by Portland with 9.3%, and Dallas with an 8.4% increase.
Seven cities reported greater price increases in the year ending April 2017 versus the year ending March 2017.
“As home prices continue rising faster than inflation, two questions are being asked: why? And, could this be a bubble?” says David M. Blitzer Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices.
Blitzer said the, since demand is exceeding supply and financing is available, there is nothing right now to keep prices from going up.
“The increase in real, or inflation-adjusted, home prices in the last three years shows that demand is rising. At the same time, the supply of homes for sale has barely kept pace with demand and the inventory of new or existing homes for sale shrunk down to only a four- month supply. Adding to price pressures, mortgage rates remain close to 4% and affordability is not a significant issue.” Blitzer said.
Blitzer said that the real question is whether home price gains gently slow or will they crash and take the economy down with them?
“For the moment, conditions appear favorable for avoiding a crash. Housing starts are trending higher and rising prices may encourage some homeowners to sell,” he said.
“Moreover, mortgage default rates are low and household debt levels are manageable. Total mortgage debt outstanding is $14.4 trillion, about $400 billion below the record set in 2008. Any increase in mortgage interest rates would dampen demand. Household finances should be able to weather a fairly large price drop,” Blitzer said.
So, the risk of another catastrophic crash in housing prices seems low.