U.S. Home Prices Continued To Rebound In March

Posted by Patrick Barnard on May 26, 2015 No Comments
Categories : Residential Mortgage

U.S. home prices increased 0.8% on average nationwide in March compared to February and were up 4.1% compared to March 2014, according to the S&P/Case-Shiller home price index (HPI).

The index's 10-city composite gained 4.7% year over year, while the 20-city composite gained 5.0% year over year.

San Francisco and Denver reported the highest year-over-year gains, with price increases of 10.3% and 10.0%, respectively, over the previous 12 months.

San Francisco's 10.3% annual gain was its first double-digit year-over-year increase since July 2014, according to the report.

Dallas reported a 9.3% year-over-year gain to round out the top three cities.

‘Home prices have enjoyed year-over-year gains for 35 consecutive months,’ says David M. Blitzer, managing director and chairman of the index committee for S&P Dow Jones Indices, in a release. ‘The pattern of consistent gains is national and seen across all 20 cities covered by the S&P/Case-Shiller Home Price Indices. The longest run of gains is in Detroit at 45 months; the shortest is New York with 27 months. However, the pace has moderated in the last year; from August 2013 to February 2014, the national index gained more than 10% year over year, compared to 4.1% in this release.

‘Given the long stretch of strong reports, it is no surprise that people are asking if we're in a new home price bubble,’ Blitzer adds. ‘The only way you can be sure of a bubble is looking back after it's over. The average 12-month rise in inflation-adjusted home prices since 1975 is about 1.0% per year compared to the current 4.1% pace, arguing for a bubble.

Blitzer notes, however, that the annual rate of increase has been halved during the last year.

‘Home prices are currently rising more quickly than either per capita personal income (3.1%) or wages (2.2%), narrowing the pool of future home buyers,’ he says. ‘All of this suggests that some future moderation in home prices gains is likely. Moreover, consumer debt levels seem to be manageable. I would describe this as a rebound in home prices – not a bubble and not a reason to be fearful.’

The increase in March was part of a trend that carried through most of the first quarter. According to the Federal Housing Finance Agency's (FHFA) HPI, U.S. home prices increased 1.3% in the first quarter compared to the fourth quarter of 2014. It was the 15th consecutive quarter that home prices increased, according to the report.

The FHFA's seasonally adjusted HPI shows that home prices increased 0.3% in March compared to February.

‘The first quarter saw strong and widespread home price growth throughout most of the country,’ says Andrew Leventis, principal economist for the FHFA, in a release. ‘Home prices are now, on average, roughly 20 percent above where they were three years ago. This run-up has been historically exceptional and is particularly notable in light of the limited household income growth and modest rate of overall inflation observed during that same time period.’

Year over year, the FHFA's HPI shows that home prices rose 5.0% from the first quarter of 2014 to the first quarter of 2015.

During that same time period, home prices rose in 48 states, led by Colorado (11.2%), Nevada (10.1%), Florida (8.7%), Washington (7.6%) and California (7.5%).

Meanwhile, Black Knight Financial Services' HPI shows that U.S. home prices increased 1.2% in March compared to February and were up 4.8% year over year.

According to that report, the average price for a home in the U.S. as of March was $245,000 – about 8.4% below the peak average home price of $268,000 seen in June 2006.

Earlier this month, CoreLogic released its HPI report, showing that U.S. home prices, including distressed sales, increased 2% in March 2015 compared to February and were up 5.9% year over year.

CoreLogic says the average home price, as of March, was within 10% of the peak seen in April 2006.

Excluding distressed sales, home prices increased about 2% in March compared to February and were up about 6.1% compared to March 2014.

CoreLogic forecasts that home prices, including distressed sales, will increase 0.8% in April compared to March and will increase by 5.1% by March 2016.

Excluding distressed sales, home prices are forecast to increase by 0.7% in April compared to March and will increase 4.7% by March 2016.

‘The homes-for-sale inventory continues to be limited while buyer demand has picked up with low mortgage rates and improving consumer confidence,’ says Frank Nothaft, chief economist for CoreLogic, in a release. ‘As a result, there has been continued upward pressure on prices in most markets, with our national monthly index up two percent for March 2015 and up approximately six percent from a year ago.’

‘All signs are pointing toward continued price appreciation throughout 2015,’ adds Anand Nallathambi, president and CEO of CoreLogic. ‘In fact, the strong month-over-month gain in March may be a harbinger of accelerating price appreciation as we enter the spring selling season. Tight inventories, job growth, and the inexorable impact of demographics and household formation are pushing price levels in many states, and especially large metropolitan areas such as Dallas, Denver, Houston, Seattle and San Francisco, toward record levels.’

Including distressed sales, states that saw the highest home price appreciation, year over year, in March were Colorado (9.2%), South Carolina (9.1%), Kansas (8.0%), Texas (8.0%) and Nevada (7.6%), according to CoreLogic.

Excluding distressed sales, states with the highest home price appreciation were Kansas (9.5%), Colorado (8.5%), South Carolina (8.2%), Florida (7.9%) and Texas (7.6%).

It should be noted that each of the aforementioned HPIs uses a slightly different methodology – as examples, the FHFA's HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac; the CoreLogic HPI includes distressed sales; and the Black Knight HPI uses data flowing through the firm's mortgage origination software.

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