Home prices continued their rise across the country over the last 12 months, with the majority of July gains concentrated in the west, according to the recently released S&P/Case-Shiller Home Price Indices.
Year-Over-Year
The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a slightly higher year-over-year gain with a 4.7 percent annual increase in July 2015 versus a 4.5 percent increase in June 2015. The 10-City Composite was virtually unchanged from last month, rising 4.5 percent year-over-year. The 20-City Composite had higher year-over-year gains, with an increase of 5 percent.
“The market is ‘steady as she goes,’” says Stephen Phillips, president of Berkshire Hathaway HomeServices. “We are continuing on a positive trend that goes back three years, steady mid-single-digit gains for the index. Demand is reasonably good in many markets. Supply is relatively low in many markets and interest rates remain supportive.”
San Francisco, Denver and Dallas reported the highest year-over-year gains among the 20 cities with price increases of 10.4 percent, 10.3 percent, and 8.7 percent, respectively. Fourteen cities reported greater price increases in the year ending July 2015 over the year ending June 2015. San Francisco and Denver are the only cities with a double-digit increase, and Phoenix had the longest streak of year-over-year increases. Phoenix reported an increase of 4.6 percent in July 2015, the eighth consecutive year-over-year increase. Boston posted a 4.3 percent annual increase, up from 3.2 percent in June 2015—the biggest jump in year-over-year gains this month.
Month-Over-Month
Before seasonal adjustment, the National Index posted a gain of 0.7 percent month-over-month in July. The 10-City Composite and 20-City Composite both reported gains of 0.6 percent month-over-month. After seasonal adjustment, the National Index posted a gain of 0.4 percent, while the 10-City and 20-City Composites were both down 0.2 percent month-over-month. All 20 cities reported increases in July before seasonal adjustment; after seasonal adjustment, 10 were down, nine were up, and one was unchanged.
“Prices of existing homes and housing overall are seeing strong growth and contributing to recent solid growth for the economy,” says David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “The S&P/Case-Shiller National Home Price Index has risen at a 4 percent or higher annual rate since September 2012, well ahead of inflation. Most of the strength is focused on states west of the Mississippi. The three cities with the largest cumulative price increases since January 2000 are all in California: Los Angeles (138 percent), San Francisco (116 percent) and San Diego (115 percent). The two smallest gains since January 2000 are Detroit (3 percent) and Cleveland (10 percent). The Sunbelt cities—Miami, Tampa, Phoenix and Las Vegas—which were the poster children of the housing boom, have yet to make new all-time highs.
“The economy grew at a 3.9 percent real annual rate in the second quarter of 2015 with housing making a major contribution. Residential investment grew at annual real rates of 9 -10 percent in the last three quarters (2014: 4th quarter, 2015: 1st – 2nd quarters), far faster than total GDP. Further, expenditures on furniture and household equipment, a sector that depends on home sales and housing construction, also surpassed total GDP growth rates. Other positive indicators of current and expected future housing activity include gains in sales of new and existing housing and the National Association of Home Builders sentiment index. An interest rate increase by the Federal Reserve, now expected in December by many analysts, is not likely to derail the strong housing performance.
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