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New Data Reaffirms Home Price Appreciation

Phil Hall
Dec 27, 2016

Three newly issued data reports have come to the same conclusion: Home prices were up in October.

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index reached a new peak when it reported a 5.6 percent annual gain in October, up from 5.4 percent last month. The 10-City Composite posted a 4.3 percent annual increase, up from 4.2 percent the previous month, and the 20-City Composite reported a year-over-year gain of 5.1 percent, up from five percent in September.

Before the seasonal adjustment, the National Index posted a month-over-month gain of 0.2 percent in October while the 10-City Composite was unchanged and the 20-City Composite saw a 0.1 percent increase in October. After seasonal adjustment, the National Index recorded a 0.9 percent month-over-month increase, while both the 10-City and 20-City Composites each reported a 0.6 percent month-over-month increase.

“Home prices and the economy are both enjoying robust numbers,” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “However, mortgage interest rates rose in November and are expected to rise further as home prices continue to out-pace gains in wages and personal income. Affordability measures based on median incomes, home prices and mortgage rates show declines of 20 to 30 percent since home prices bottomed in 2012. With the current high consumer confidence numbers and low unemployment rate, affordability trends do not suggest an immediate reversal in home price trends. Nevertheless, home prices cannot rise faster than incomes and inflation indefinitely.”

In another study, Black Knight Financial Services (BKFS) found home prices in October were up 5.6 percent on a year-over-year basis and up 0.2 percent from the previous month. October marked the 54th consecutive month of annual national home price appreciation, according to the company’s data reporting.

Among the nation’s largest states, six hit new home price peaks—including New York ($363,000), which also saw the greatest month-over-month increase in October with a 0.7 percent upswing. Seven of the nation’s 40 largest metro areas also recorded house price peaks, with Florida accounting for eight of the top 10 markets for home appreciation, most notably in Daytona Beach and Punta Gorda (both at a 1.2 percent increase). And some of the nation’s priciest markets became even more expensive: Portland, Seattle and Denver each recorded annual home price appreciation rates of 10 percent or higher.

Separately, First American Financial Corporation’s Real House Price Index (RPHI) for October recorded a 0.7 percent increase from September to October, and a projected 5.3 percent year-over-year increase for unadjusted house prices. On an unadjusted measurement, First American stated that the national price level is 0.01 percent below the housing-boom peak in 2007.

The five states with the highest year-over-year increase in the RHPI in October were Wyoming (6.2 percent), Nevada (5.3 percent), Maine (4.7 percent), Colorado (4.4 percent) and Michigan (4.3 percent). Among the major metro areas, Charlotte, N.C., and Jacksonville, Fla., were the leading markets, tied with a 9.8 percent increase.

“While we have yet to see the impact of the ‘Trump Bump’ and Yellen’s increase in mortgage rates on unadjusted house prices, I expect there to be an impact early next year,” said Mark Fleming, chief economist at First American. “In 2013, we saw the significant slowing effect the ‘taper-tantrum’ had on unadjusted house prices. We expect unadjusted prices to respond similarly to the recent increases in mortgage rates, though to a lesser degree this time. While mortgage rates above four percent reduce affordability, accelerating wage growth and the expected slowdown in unadjusted price appreciation are both beneficial for affordability. I expect the net effect on consumer house-buying power to remain modest.” 

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