Home prices increased 0.7% on an adjusted basis in December compared with November and increased 5.8% compared with December 2015, according to the S&P CoreLogic Case-Shiller U.S. National Home Price index.
The index’s 10-city and 20-city composites each saw home prices increase 0.9%, on an adjusted basis, month over month.
On an unadjusted basis, home prices increased 0.2% in December compared with November.
The 10-city and 20-city composites each posted a 0.3% increase, on an unadjusted basis, month over month.
Eighteen of the 20 cities reported increases in December, before seasonal adjustment. After seasonal adjustment, all 20 cities saw prices rise.
Seattle; Portland, Ore.; and Denver reported the highest year-over-year gains among the 20 cities over the 11 months leading up to December. Seattle led the way, with a 10.8% year-over-year price increase in December, followed by Portland, with 10.0%, and Denver, with 8.9%. Twelve cities reported greater price increases in the year ended December versus the year ended November.
“Home prices continue to advance, with the national average rising faster than at any time in the last two-and-a-half years,” says David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, in a statement. “With all 20 cities seeing prices rise over the last year, questions about whether this is a normal housing market or if prices could be heading for a fall are natural.
“In comparing current home price movements to history, it is necessary to adjust for inflation,” Blitzer continues. “Consumer prices are higher today than 20 or 30 years ago, while the inflation rate is lower. Looking at real or inflation-adjusted home prices based on the S&P CoreLogic Case-Shiller National Index and the Consumer Price Index, the annual increase in home prices is currently 3.8 percent. Since 1975, the average pace is 1.3 percent; about two-thirds of the time, the rate is between -4 percent and +7 percent. Home prices are rising, but the speed is not alarming.”
Blitzer says low inventory is partly what is driving up home prices and keeping them elevated.
“While sales of existing single-family homes passed 5 million units at annual rates in January – the highest since 2007 – the inventory of homes for sale remains quite low, with a 3.6-month supply,” he says. “New home sales at 555,000 in 2016 are up from recent years but remain below the average pace of 700,000 per year since 1990.”