U.S. home prices continued to rise in January, increasing 0.5% on an adjusted basis compared with December, due mainly to a lack of inventory, according to the S&P CoreLogic Case-Shiller Indices.
On a year-over-year basis, home prices were up 6.2% compared with January 2017 – however, this is down from 6.3% in December. The 10-city composite saw an annual increase of 6.0% while the 20-city composite posted a gain of 6.4%.
On an unadjusted basis, home prices increased 0.05% month-over-month in January. The 10-city and 20-city composites both reported increases of 0.3%.
Seattle, Las Vegas and San Francisco reported the highest year-over-year gains among the 20 cities. In January, Seattle led the way with a 12.9% year-over-year price increase, followed by Las Vegas with an 11.1% increase and San Francisco with a 10.2% increase.
Twelve of the 20 cities reported greater price increases in the year ending January 2018 versus the year ended December 2017.
“The home price surge continues,” says David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. “Since the market bottom in December 2012, the S&P Corelogic Case-Shiller National Home Price index has climbed at a 4.7 percent real – inflation adjusted – annual rate. That is twice the rate of economic growth as measured by the GDP.
“While price gains vary from city to city, there are few, if any, really weak spots,” Blitzer says. “Seattle, up 12.9 percent in the last year, continues to see the largest gains, followed by Las Vegas up 11.1 percent over the same period. Even Chicago and Washington, the cities with the smallest price gains, saw a 2.4 percent annual increase in home prices.
Blitzer says the two main factors driving home price appreciation are low inventory and a low vacancy rate among owner-occupied housing.
“The current months-supply – how many months at the current sales rate would be needed to absorb homes currently for sale – is 3.4,” Blitzer says. “The average since 2000 is 6.0 months, and the high in July 2010 was 11.9.”
Also driving up home prices is the lower-than-normal homeowner vacancy rate.
“Currently, the homeowner vacancy rate is 1.6 percent compared to an average of 2.1 percent since 2000; it peaked in 2010 at 2.7 percent,” Blitzer says.
“Despite limited supplies, rising prices and higher mortgage rates, affordability is not a concern,” he adds. “Affordability measures published by the National Association of Realtors show that a family with a median income could comfortably afford a mortgage for a median priced home.”