Persistent inventory shortages drove home prices to a 30-month high in December, rising 5.8% from a year ago on the latest S&P Core Logic Case-Shiller U.S. National Home Price Index. That’s compared to an annual increase of 5.6% in November, and it is 0.5% ahead of the previous market peak in July 2006.
Among metros on the index’s 20-city composite, prices were up 5.6% annually in December compared to 5.2% in November but remain 6.7% off the cycle high set in July 2006.
- Seattle, Portland, OR, and Denver once again posted the largest annual gains among metros on the 20-city index, at 10.8%, 10% and 8.9%, respectively. Twelve cities saw the rate of price increases grow between November and December.
Tight inventory, along with below-average (albeit growing) new-home sales and rising mortgage rates are factors contributing to the steady rise in prices, according to David Blitzer, chairman and managing director of the Index Committee at S&P Dow Jones Indices, who noted that there is a 3.6-month supply of for-sale home stock.
That the low-, medium- and high-priced market tiers are responding independently to these factors suggests that, although high, the current price growth is typical and that a bust is less likely than a slow tapering, Blitzer noted. In its 2017 Housing Forecast, Realtor.com said to expect a slight deceleration in home-price growth nationwide this year.
Although the South and West are expected to see considerable home-price increases yet, a recent report from Zillow indicates that the pressure may be shifting. Home-price appreciation is slowing on the West Coast and picking up in the south, with markets in Texas, Tennessee and Florida, in particular, seeing annual increases of more than 10%.
The result, in these and other markets, is a growing gap between the type of homes buyers can afford and those currently on the market. To better gauge the disparity, the National Association of Realtors and Realtor.com teamed up to launch the Affordability Distribution Curve and Score, a new index that explores supply versus demand at multiple income levels and market tiers, rather than solely the median-income buyer and median-priced home that most rankings consider.
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