U.S. home prices were basically flat in January compared with December and were up 5.4% compared with January 2015, according to the S&P/Case-Shiller Home Price Indices.
Both the 10-city and 20-city composites remained unchanged, month over month, in January. On a year-over-year basis, the 10-city composite was up slightly at 5.1% and the 20-city composite was up 5.7%.
After seasonal adjustment, all three composites reported strong advances. Eleven of 20 cities reported increases in January before seasonal adjustment; after seasonal adjustment, all 20 cities increased for the month.
Portland, Seattle and San Francisco reported the highest year-over-year gains among the 20 cities. Each saw another month of double-digit annual price increases.
Portland led the way with an 11.8% year-over-year price increase, followed by Seattle with 10.7% and San Francisco with a 10.5% increase.
“Home prices continue to climb at more than twice the rate of inflation,” says David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, in a release. “The low inventory of homes for sale – currently about a five-month supply – means that would-be sellers seeking to trade up are having a hard time finding a new, larger home.
“The recovery of the sale and construction of new homes has lagged the gains seen in existing-home sales,” he adds. “This may be starting to change: Starts of single-family homes in February were the highest since November 2007. The single-family-home share of total housing starts was 70 percent in February – up from a low of 57 percent in June 2015 and approaching the 75 percent to 80 percent range seen before the housing crisis.
“While low inventories and short supply are boosting prices, financing continues to be a concern for some potential purchasers, particularly young adults and first-time home buyers,” Blitzer adds. “The issue is availability of credit for people with substantial student or credit card debt. While rising home prices are certainly a factor deterring home purchases, individual financial positions are more important than local housing market conditions. One hopeful sign is that the homeownership rate, at 63.7 percent in the fourth quarter of 2015, may be turning around. It is up slightly from 63.5% in the second quarter of 2015 but far below the 2004 high of 69.1%.”
