Home prices continued to rise in January reporting an annual growth of 6.2 percent according to the latest S&P CoreLogic Case-Shiller Home Price Index that was released by S&P Indices on Tuesday. The index, which consists of the National Home Price NSA Index, A 10-City Composite Index, and a 20-City Composite Index, reported price growth on all these indices.
While the 10-City Composite recorded an annual increase of 6 percent, the 20-City Composite posted a 6.4 percent year-over-year growth.
“The home price surge continues,” said David M. Blitzer, Managing Director and Chairman of the Index Committee at the S&P Dow Jones Indices. “Since the market bottom in December 2012, the S&P CoreLogic Case-Shiller National Home Price index has climbed at a 4.7 percent real—inflation-adjusted—annual rate.”
“Our first glimpse into Case Shiller home price data in 2018 confirms high prices are here to stay,” said Danielle Hale, Chief Economist at Realtor.com. “In fact, if we continue to see a steady stream of buyers and owners remain largely uninterested in selling, we can expect prices to continue to rise.”
The City Composite indices were once again dominated by some of the hottest markets in the country with Seattle, Las Vegas, and San Francisco recording the highest price appreciation at 12.9 percent, 11.1 percent, and 10.2 percent respectively.
“The hottest housing markets are once again dominated by the West, led by double-digit annual growth in Seattle, Las Vegas, and San Francisco,” said Cheryl Young, Senior Economist at Trulia. “Seattle shows no signs of cooling anytime soon as it recorded its 25th consecutive month of double-digit year-over-year price growth. This is the first time since January 2016 that San Francisco is back into double-digit price growth territory, sounding alarm-bells in a city where median home prices hover around $1.3 million.”
“Despite the high prices, homes don’t sit long before being snatched up in these areas, which suggests these markets remain tipped in favor of sellers as we head into spring,” Hale said.
A low inventory and a low vacancy rate among owner-occupied housing are two factors supporting these price increases according to Blitzer. “The current months-supply—how many months at the current sales rate would be needed to absorb homes currently for sale—is 3.4; the average since 2000 is 6 months, and the high in July 2010 was 11.9. Currently, the homeowner vacancy rate is 1.6 percent compared to an average of 2.1 percent since 2000; it peaked in 2010 at 2.7 percent,” Blitzer said.
Tian Liu, Chief Economist at Genworth Mortgage Insurance agreed. “The Case-Shiller Home Price Index continues to support our view that today’s housing market is driven by a mismatch of demand and supply. There is a robust demand by first-time homebuyers for affordable homes, and equally robust supply for higher-end homes,” he said.
For those citing affordability issues in housing, Blitzer said that despite limited supplies, rising prices, and higher mortgage rates, affordability is not a concern. “Affordability measures published by the National Association of Realtors show that a family with a median income could comfortably afford a mortgage for a median-priced home,” he said.
But where are those homes? “First-time home buyers, however, will continue to struggle to find homes within their price range as prices climb higher amid low inventory,” Young said. “Starter buyers continue to shoulder the greatest burden of unaffordability as low inventory and escalating prices grip the housing market.”