Home prices continue to rise, with the latest S&P CoreLogic Case–Shiller U.S. National Home Price Index recording a 5.9% annual increase in January, up from 5.7% in December, to reach a 31-month high.
Once again, Seattle (11.3%), Portland, OR (9.7%) and Denver (9.2%) posted the largest annualized price increases during the month, while 12 cities saw greater year-over-year price growth in January 2017 than did in December 2016.
- Within the index, a composite of 20 major U.S. cities saw a 5.7% year-over-year gain, compared to 5.5% in December, matching analyst predictions, according to economists polled by MarketWatch.
Home prices continue to climb as tight inventory squeezes the market, making it difficult for existing homeowners to trade up and for new buyers to enter. But David M. Blitzer, the managing director and chairman of the S&P Dow Jones Indices Index Committee, said in a release that this cycle of rising prices and mortgage rates will eventually stabilize. But plans by the Federal Reserve to further raise rates this year means that leveling off is not likely to happen very soon.
Despite the recent 25-basis-point increase in benchmark mortgage rates by the Fed, analysts say strong market fundamentals will continue to drive demand for housing. Positive reports in new-home sales and housing starts point to that foundation, with sales climbing 6.1% in February and housing starts ticking up 3% for the month, driven by the single-family category.
Rising construction employment is another indicator of growth, and confidence, in the market. The industry added nearly 19,000 residential construction jobs in February. Still, a drop-off in existing-home sales for the 21st-consecutive month shows the impact of the persisting inventory shortage.
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