U.S. home prices took a major leap in April, setting a monthly record for gains.
From March to April, home prices gained 2.6 percent and 2.5 percent for the top 10 and top 20 markets respectively, according to the latest S&P/Case-Shiller Home Price Indices. Average prices rose 11.6 percent and 12.1 percent in April from a year ago.
"The recovery is definitely broad based," said David Blitzer of S&P Dow Jones in the report. "The two composites showed the largest year-over-year gains in seven years."
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Atlanta, Las Vegas, Phoenix and San Francisco posted year-over-year gains of more than 20 percent in April, with San Francisco leading the way at 23.9 percent. Phoenix posted 12 consecutive months of double-digit growth, as investors there continue to compete for what few distressed properties are for sale. Inventories did rise in Phoenix in May slightly, but demand is still outstripping supply, and pushing prices higher.
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Concerns about rising mortgage rates, which spiked in to the mid-4 percent range in just the past week, have dampened expectations for home price gains this summer. Analysts also worry that prices are rising too fast, far faster than income growth, and will soon price too many potential buyers out of the housing market.
"Today's Case-Shiller numbers may reflect where the housing market has been in some of the frothier metros, but they are not indicative of where it's headed," said Zillow's chief economist, Stan Humphries. "The housing market worm has turned over the past few weeks—inventory levels are beginning to show signs of easing, and mortgage interest rates are creeping up. Going forward, both of these factors will help mitigate extreme price spikes caused by very strong housing demand and very low housing supply."
This latest report only tracks prices on a three-month moving average through the end of April, well before mortgage rates began their climb. Still, Blitzer contends that rising rates will not slow price gains.
"Home buyers have survived rising mortgage rates in the past, often by shifting from fixed rate to adjustable rate loans. In the housing boom, bust and recovery, banks' credit quality standards were more important than the level of mortgage rates.The most recent Fed Senior Loan Officer Opinion Survey shows that some banks are easing credit restrictions. Given this, the recovery should continue," he said.
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As of the end of April, average home prices across the nation were back to levels of early 2004. Prices are still down between 26 and 27 percent from their peaks in the summer of 2006.
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