Data through September 2013, released by S&P Dow Jones Indices for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, showed that the U.S. National Home Price Index rose 3.2 percent in the third quarter of 2013 and 11.2 percent over the last four quarters. In September 2013, the 10- and 20-City Composites gained 0.7 percent month-over-month and 13.3 percent year-over-year. While 13 of 20 cities posted higher year-over-year growth rates, 19 cities had lower monthly returns in September than August.
“The second and third quarters of 2013 were very good for home prices,” said David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices. “The National Index is up 11.2 percent year-over-year, the strongest figure since the boom peaked in 2006. The 10-City and 20-City Composites year-over-year growth at 13.3 percent was their highest annual numbers since February 2006."
The chart below depicts the annual returns of the U.S. National, the 10-City Composite and the 20-City Composite Home Price Indices. The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded an 11.2 percent gain in the third quarter of 2013 over the third quarter of 2012. In September 2013, the 10- and 20-City Composites posted annual increases of 13.3 percent.
“Twelve cities posted double-digit annual returns. Regionally, the West continues to lead with Las Vegas gaining 29.1 percent year-over-year followed by San Francisco at 25.7 percent, Los Angeles at 21.8 percent and San Diego at 20.9 percent," said Blitzer. "San Francisco and Los Angeles showed their highest annual returns since March 2001 and December 2005. Although Chicago has not reached double-digit growth, the city recorded its highest year-over-year gain since November 2005."
The chart below shows the index levels for the U.S. National Home Price Index, as well as its annual returns. As of the third quarter of 2013, average home prices across the U.S. are back to their levels posted in the second quarter of 2004. At the end of the third quarter of 2013, the National Index was up 3.2 over the second quarter of 2013 and 11.2% above the third quarter of 2012.
Nineteen cities decelerated month-over-month from August to September. Las Vegas and Tampa showed the most weakness with their rates declining by 1.6 percentage points. Las Vegas went from a +2.9 percent monthly return in August to +1.3 percent in September while Tampa decreased from +1.8 percent to +0.2 percent. Charlotte was the only city to post a negative monthly return for September, its first since November 2012. Detroit managed to take the lead with a monthly increase of 1.5 percent, but still remains the only city below its January 2000 level.
Looking at the September annual rates of change, 13 cities showed improvement versus their August year-over-year returns. Cleveland accelerated the most (from +3.7 percent in August to +5.0 percent in September), but it remains the second worst performing city with only New York trailing at +4.3 percent.
Twelve MSAs showed double-digit increases with Las Vegas, Los Angeles, San Diego and San Francisco posting gains of over 20 percent. Las Vegas posted an impressive year-over-year increase of 29.1 percent in September, marginally down from 29.2 percent in August.
"The strong price gains in the West are sparking questions and concerns about the possibility of another bubble. However the talk is focused on fear of a bubble, not a rush to join the party and buy. Moreover, other data suggest a market beginning to shift to slower growth rather than one about to accelerate. Existing home sales weakened in the most recent report, home construction remains far below the boom levels of six or seven years ago and interest rates are expected to be higher a year from now.
"Housing continues to emerge from the financial crisis: the proportion of homes in foreclosure is declining and consumers’ balance sheets are strengthening. The longer run question is whether household formation continues to recover and if home ownership will return to the peak levels seen in 2004."