Home prices continued to climb as 2017 ended.
The S&P CoreLogic Case-Shiller National Home Price Index rose 6.3% in December, up from 6.1% a month earlier. In December, the 20-City Composite posted a slight dip from November, with a 6.3% year over year increase, in line with analysts estimates of a 6.35% year-over-year increase. Record low inventory continued to elevate prices through the end of last year.
“The rise in home prices should be causing the same nervous wonder aimed at the stock market after its recent bout of volatility,” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones in a press statement, noting that the national index, which reached its low point in 2012, is up 38% in six years after adjusting for inflation, a real annual gain of 5.3%. The index’s average annual real gain from 1976 to 2017 was 1.3%. “Even considering the recovery from the financial crisis, we are experiencing a boom in home prices.”
Seattle continued to lead the 20-City index. In December, Seattle posted a 12.7% year-over-year price increase, followed by Las Vegas with an 11.1% increase, and San Francisco with a 9.2% increase. Nine cities reported greater price increases in the year ending December 2017 versus the year ending November 2017.
“Across the 20 cities covered by S&P Corelogic Case Shiller Home Price Indices, the average increase from the financial crisis low is 62%; over the same period, inflation was 12.4%,” said Blitzer. “None of the cities covered in this release saw real, inflation-adjusted prices fall in 2017.”
Signs of a slowdown
But Blitzer acknowledged recent signs of a slowing housing market. Existing home sales, which account for about 90% of U.S. home sales, declined 4.8% on a year-on-year basis in January, the second straight month of declines, according to the National Association of Realtors last week. That was the biggest year-on-year drop since August 2014. New home sales also slipped in January. The Commerce Department said new home sales dropped 7.8% to a seasonally adjusted annual rate of 593,000 units last month — the lowest level since August 2017.
“While the price increases do not suggest any weakening of demand, mortgage rates rose from 4% to 4.4% since the start of the year,” he said, adding that if the market is slowing we will see “some moderation in price gains could be seen later this year.”
Amanda Fung is an editor at Yahoo Finance