U.S. home prices increased 0.4% on an adjusted basis in February compared with January and increased 5.8% compared with February 2016, according to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index.
Not only was it the fourth consecutive month that home prices increased, but home prices also nationally hit an all-time high.
Month over month, the report’s 10-city composite, which includes the 10 largest metro areas, posted a 0.6% increase, while the 20-city composite saw a 0.7% increase.
Year over year, the 10-city composite posted a 5.2% increase, while the 20-city composite saw a 5.9% increase.
Sixteen of 20 cities reported increases in February before seasonal adjustment; after seasonal adjustment, 19 cities saw prices rise.
Before seasonal adjustment, the national index posted a month-over-month gain of 0.2%. The 10-city composite posted a 0.3% increase, while the 20-city composite reported a 0.4% increase.
Seattle; Portland, Ore.; and Dallas reported the highest year-over-year gains among the 20 cities. Seattle led the way, with a 12.2% year-over-year price increase, followed by Portland, with 9.7%, and Dallas, with 8.8%.
David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, points out that “other housing indicators are also advancing”; for example, the National Association of Realtors recently reported that existing-home sales in March increased 4.4% compared with February and increased 5.6% compared with March 2016.
“There are still relatively few existing homes listed for sale, and the small 3.8-month supply is supporting the recent price increases,” Blitzer says in a statement. “Housing affordability has declined since 2012, as the pressure of higher prices has been a larger factor than stable to lower mortgage rates.”
As Blitzer points out, home prices won’t start to come down until builders start building more affordable homes and inventory starts to increase. That appears to be just now starting to happen.
“New home construction is now close to a normal pace of about 1.2 million units annually, of which around 800,000 are single-family homes,” he says. “Most housing rebounds following a recession only last for a year or so. The notable exception was the boom that set the stage for the bubble. Housing starts bottomed in 1991, drove through the 2000-2001 recession, and peaked in 2005 after a 14-year run.”