Although home prices continued their upward trek all over the country, they are doing so at a much slower pace, according to data on the recent U.S. House Price Index (HPI) released by the Federal Housing Finance Agency (FHFA).
The report showed a national 0.4 percent month-over-month increase from January to February, and a 5.6 percent annual jump between February 2015 and February 2016.
January's HPI report showed a 0.5 percent increase, which was revised downward to reflect a 0.4 percent increase.
Geographically, pricing changes varied, with a month-over-month 0.7 decrease in the South Atlantic census division, which includes Delaware, Maryland, District of Columbia, Virginia, West Virginia, North Carolina, South Carolina, Georgia, and Florida, the FHFA reported. The Middle Atlantic division (New York, New Jersey, Pennsylvania) experienced a 1.7 percent increase from January 2016 to February 2016.
The 12-month changes were all positive, in the New England division (Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, and Connecticut) and the Pacific division (Hawaii, Alaska, Washington, Oregon, and California), rising 2.5 percent to 8.4 percent, respectively.
In the midst of what some are calling a global crisis—due to weaknesses in the energy sector and stock market combined with the effects of an overly strong U.S. dollar—home prices continue to move upward. Despite this however the housing sector is just not large enough to carry the weight of the world.
The S&P/Case-Shiller U.S. National Home Price Index (HPI) released Tuesday found that home prices rose for the 43rd consecutive month in November 2015. According to the HPI report, home prices rose 5.3 percent year-over-year in November, slightly up from the 5.1 percent increase recorded in October 2015.
“Home prices extended their gains, supported by continued low mortgage rates, tight supplies and an improving labor market,” said David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Sales of existing homes were up 6.5 percent in 2015 vs. 2014, and the number of homes on the market averaged about a 4.8 months’ supply during the year; both numbers suggest a seller’s market."
As housing demand continues to rise, interest rates remain at historical lows, credit conditions ease, and the labor market improves, home price growth continues to climbs but for how much longer?
An analysis from Capital Economics projects that the Federal Reserve will be modest in interest rate increases and home prices will increase by a forecasted 6 percent in 2016. In addition, home price gains will be more modest in 2017 at 4 percent, prior to rising interest rates lead to a complete economic slowdown in 2018.
"That profile for house price gains is above consensus for both 2016 and 2017, which is for gains of under 4 percent,” the report stated. “But our forecast is below consensus for 2018, where our expectation for prices to hold steady compares to a consensus view of a gain of 3 percent.”