As home prices continue to rise faster than wages and inflation, more Americans are finding themselves priced out of the market.
In addition, it now appears that rising home prices and interest rates are starting to weigh on homebuyers’ psyches.
U.S. home prices increased 0.4% on an adjusted basis in May compared with April and were up 6.4% compared with May 2017, according to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index.
The index’s 10-city and 20-city composites reported month-over-month increases of 0.1% and 0.2%, respectively, and year-over-year increases of 6.1% and 6.5%.
Without seasonal adjustment, U.S. home prices were up 1.1%, month-over-month, in May. The 10-city and 20-city composites reported increases of 0.5% and 0.7%, respectively.
Seattle, Las Vegas, and San Francisco continued to report the highest year-over-year gains among the 20 cities.
In May, Seattle led the way with a 13.6% year-over-year price increase, followed by Las Vegas with a 12.6% increase and San Francisco with a 10.9% increase.
“Home prices continue to rack up gains two to three times greater than the inflation rate,” says David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. “The year-over-year increases in the S&P CoreLogic Case-Shiller National Index have topped five percent every month since August 2016.
“Unlike the boom-bust period surrounding the financial crisis, price gains are consistent across the 20 cities tracked,” Fleming adds. “Currently, the range of the largest to smallest price change is 10 percentage points compared to a 20 percentage point range since 2001, and a 25 percentage point range between 2006 and 2009. Not only are prices rising consistently, they are doing so across the country.”
The downside is that it’s eating away at affordability. Fleming points out that sales of existing singly-family homes have decreased for the past three months. That’s most of the spring home buying season.
“The number of pending home sales is drifting lower as is the number of existing homes for sale,” he says. “Sales of new homes are also down and housing starts are flattening. Affordability – a measure based on income, mortgage rates and home prices – has gotten consistently worse over the last 18 months. All these indicators suggest that the combination of rising home prices and rising mortgage rates are beginning to affect the housing market.”
