Home prices continue to move upward

U.S. home prices continued to accelerate nationally and in the major cities as 2017 came to a close, the S&P CoreLogic Case-Shiller indices reported on Tuesday.

Nationally, prices rose 6.2 percent annually in November, up from 6.1 percent in October. The 10-city and 20-city composite indices rose 6.1 percent and 6.4 percent annually, with both indices picking up the pace from October.

Seattle home prices outpaced all others with a 12.7 percent annual gain in November, followed by Las Vegas (10.6 percent) and San Francisco (9.1 percent).

“Home prices continue to rise three times faster than the rate of inflation,” said David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. Blitzer said the index has made an annual gain of at least 5 percent for 16 consecutive months.

Blitzer said a low level of supply has pushed up prices, noting that single-family home starts, at around 632,000 annually, are running even lower than at the start of the housing crisis (698,000 units) and far below the long-run average level of more than one million units.

“Without more supply, home prices may continue to substantially outpace inflation,” Blitzer said.

Case-Shiller’s reading was consistent with other recent price releases. Black Knight reported that U.S. home prices reached another peak in November, and had gained nearly 6.5 percent since the beginning of 2017. New York led all states, gaining 1.36 percent from October.

Despite the increase in home prices, First American Chief Economist Mark Fleming said low interest rates have kept homes relatively affordable in a historic context.

“In fact, consumer house-buying power is 2.3 times higher than it was in 2000, almost two decades ago,” Fleming said. “It’s also only 2.9 percent below the peak in July 2016. Because the long-run trend in mortgage interest rates has been downward, from a peak of 18 percent in 1981, the housing market has benefited from consistently increasing house-buying power,” Fleming said.

First American estimated that when incomes and mortgage rates are factored in, home prices have increased by just 5 percent in the 12 months through November.